x Abu Dhabi, UAEWednesday 17 January 2018

Global appetite for Glencore high with $11bn IPO oversubscribed by double

Abu Dhabi's Aabar pitched its wagon to a popular horse with Glencore which has revealed its $11 billion IPO was oversubscribed.

Glencore International, which counts Abu Dhabi's Aabar as its biggest investor, received enough demand from investors for its $11 billion (Dh40bn) initial public offering to sell the shares more than twice over, according to sources.

Demand for stock in the world's largest commodities trader weathered a rout in raw materials prices last week, the biggest in two years, which wiped out $99 bn of market value. The IPO will give Glencore a value of $61 billion if priced at the midpoint of its offer range, the company said last week.

The last orders for the offer are due on May 18, with final pricing to be disclosed the following day, according to a term sheet for the sale.

Glencore is offering as much as 1.25 billion shares at 480 pence ($7.84) to 580 pence each, according to the company's prospectus published last week. Citigroup, Credit Suisse Group AG and Morgan Stanley are among banks managing the IPO. Current holders may sell additional shares for tax purposes, while an overallotment options brings the total to $11 bn.

Interest was helped by demand from so-called cornerstone investors, including BlackRock and Abu Dhabi's Aabar Investments.

Aabar, which is majority owned by Abu Dhabi's International Petroleum Investment Company, is investing up to $1bn in the flotation. It will initially invest $850 million as Glencore's largest "cornerstone investor" and $150m during the subscription process.

The total investment will make Aabar Glencore's largest shareholder after the company's employees, including Ivan Glasenberg, the chief executive, who is the largest stakeholder.

The commodities trader is ending more than three decades of operating as a closely held partnership. Glencore changed its name from Marc Rich & Co after management bought out former fugitive US financier Rich in 1994. It employs 2,700 people at trading units in 40 nations and about 54,800 people at its industrial units in more than 30 countries.

The combination of slower growth in US service industries and fewer German manufacturing orders helped drive the Standard & Poor's GSCI Index of 24 raw materials down 11 per cent last week, the most since December 2008.

Glencore "has got characteristics that are quite attractive and that is because it's not a pure commodity related play, that it is quite defensive," JPMorgan's Ian Henderson, a manager of about $10 bn in natural-resource assets, said. "In theory Glencore should outperform in periods of commodity price weakness. So it does have a role to play in portfolios."

The slump in commodities, on the other hand, erodes the value of Glencore's company investments. The trader's 10 largest holdings, including a 34.5 per cent stake in Xstrata Plc, fell 7.4 per cent last week, slashing about $2.4 bn off the value, according to an index of the company's investments.

With Bloomberg News