Markets

Glencore hopes to raise $2.5b in Hong Kong listing

By Fox Hu and Xiao Yu (China Daily)
Updated: 2011-01-27 14:45

BEIJING - Glencore International AG, the world's largest commodities trader, plans to raise about $2 billion to $2.5 billion in Hong Kong as part of a $10 billion initial public offering in the Chinese city and London, according to two people familiar with the matter.

Glencore plans to sell shares in the cities in the second or third quarter this year, said the people, who declined to be identified. Citigroup, Credit Suisse Group and Morgan Stanley are among the banks handling the IPO, sources said.

A share sale would mean the Baar, Switzerland-based company joins Vale SA, the world's largest iron ore exporter, and United Co Rusal, the biggest aluminum producer, in seeking access to Hong Kong investors after a record HK$384.4 billion ($49 billion) was raised in IPOs excluding overallotments there last year.

"Hong Kong is China's largest financing platform, and the exchange offers relatively higher market valuations for commodity stocks," said Danny Yan, a Hong Kong-based fund manager at Haitong International Asset Management, which oversees $400 million.

Glencore owns 34 percent of Swiss miner Xstrata Plc, which trades in London, and controls mines and metals plants on five continents. It buys and sells oil, coal, metals and grains.

A call to Glencore's Baar office out of regular business hours wasn't answered. Four calls to its Hong Kong office weren't answered. James Griffiths, a Hong Kong-based spokesman for Citigroup, declined to comment. Noel Cheung, a Morgan Stanley spokeswoman in Hong Kong, and Adam Harper, a Credit Suisse spokesman, weren't immediately available to comment.

Related readings:  Rothschild says Glencore may rival Rio, BHP  Glencore mulls IPO on cash woes  Zijin Mining buying $200m of Glencore convertible bonds  Glencore likely to get CIC investment

An offering by the firm, which was renamed Glencore after management bought US financier Marc Rich's interest in Marc Rich & Co in 1994, would end more than three decades of the company operating as a closely held partnership.

London-based brokerage Liberum Capital Ltd valued Glencore pre-IPO at $47 billion to $51 billion in a July report. An IPO would allow the company's partners to cash out part of their holdings.

The Swiss trader in November posted its best quarterly profit since the start of the global recession in 2008, boosting earnings by 43 percent after metal prices rose. Net income excluding one-time items rose to $979 million in the three months ended Sept 30. Profit for the first nine months of the year increased 42 percent to $2.5 billion.

Glencore sold convertible bonds in December 2009 for the first time, raising $2.2 billion. The terms valued the company at $35 billion at the time, the company said. The debt can be exchanged for shares should Glencore hold an initial share sale.

The bonds, which are due December 2014, were sold to investors including BlackRock Inc, the Government of Singapore Investment Corp, Greeenwich, Connecticut-based private equity investor First Reserve Corp, and Zijin Mining Group Co.

Zijin, China's biggest gold producer, bought $200 million of the convertible bonds, to "form a long-term strategic partnership with Glencore," it said in December 2009. A call to Zijin Vice Chairman Lan Fusheng's cell phone wasn't answered.

Glencore employs 2,000 people in its trading operations and more than 50,000 people at its industrial operations at 15 plants in 13 countries, according to a company fact sheet posted on its website.

Bloomberg News