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Glencore seeks up to $12.1 billion in IPO

Addison Ray

HONG KONG/LONDON | Thu Apr 14, 2011 3:51am EDT

HONG KONG/LONDON (Reuters) - Commodities giant Glencore plans to raise up to $12.1 billion in a London and Hong Kong offering that will boost dealmaking capacity at the height of a resources boom and make millionaires of its partners.

Details of the offering, outlined in a London intention-to-float and confirming an earlier Reuters story, did not include the long-awaited appointment of a new non-executive chairman for the group -- a requirement for its listing.

"It is an important decision, we are just working through the final process. We have chosen someone, so we should announce it shortly," Chief Executive Ivan Glasenberg said in a telephone interview with Reuters, declining to comment further.

Three candidates were on the shortlist days before the document was published, including former French Foreign Legionnaire Simon Murray and two others. The new chairman will sit on an eight-strong board alongside Glasenberg.

The much-anticipated float, which has generated a buzz akin to the 1999 float of Goldman Sachs, marks the end of four decades of closely guarded privacy for the world's largest commodities trading company.

The deal will also turn many of Glencore's executives into instant millionaires, although the firm has blocked senior management from selling shares for up to five years.

"All partners are invested for the long term. No one is taking money off the table," Glasenberg said.

Baar, Switzerland-based Glencore is seeking to capitalize on record-high prices for several commodities and surging demand for metals and other natural resources from fast-growing economies in China and India.

Glencore, controlled by some 500 partners, reported a 40 percent rise in 2010 net profit to $3.8 billion, while revenue climbed 36 percent to $145 billion. But slim margins at Glencore's mines and smelters have been a concern for some.

The narrow ratios contrast with better overall margins at its nearest listed rival, Noble Group (NOBG.SI).

STRONG DEMAND

"Glencore is a commodities trader and less vulnerable to commodity prices," said Helen Lau, an analyst at UOB Kay Hian. "The sheer size of trading volume in commodities will continue to rise globally. Investors probably will be very interested in the IPO, given the commodities prices are so high now."

Prices of copper and other commodities have traded at record-highs recently, with the Reuters-Jefferies CRB index .CRB, a global commodities benchmark, up more than 8 percent since the beginning of the year. The index has been trading near its strongest level since September 2008.

Sources previously told Reuters that Glencore's proposed IPO had received a positive response from potential investors when the firm's management travelled the world to gauge demand for the deal.

"It is very savvy for them to list in both London and Hong Kong. The appetite for commodity-related shares in Asia is well-known and remains robust," said Kirby Daley, a Hong Kong-based senior strategist of Newedge's prime brokerage unit, which provides services to hedge funds.



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