July 14, 2024

DealBook: Glencore to Trade in London and Hong Kong in I.P.O.

7:04 p.m. | Updated

Preparations for the jumbo stock market debut of Glencore International, the commodities producer and trader, took a step forward Thursday when it formally announced its intention to offer shares on the London and Hong Kong stock exchanges later this year.

Glencore, which is based in the Swiss town of Baar and employs nearly 58,000 people around the world, intends to float a stake of as much as 20 percent.

The main offer could raise as much as $11 billion, the bulk of that in London. The amount could rise 10 percent if demand allowed more shares to be sold, Glencore said in a statement declaring its intentions.

With a potential value of as much as $12.1 billion, the initial public offering of stock could be the biggest in the world this year. It will be closely watched in a market that remains intensely nervous about the unrest in the Middle East and North Africa and the lingering debt problems of several European countries.

A surge in the prices of oil and other raw materials that has fanned market anxiety is favorable for Glencore, whose main activity is trading metal, minerals, oil, coal and grain.

“The I.P.O. has come at a good time,” Miriam Hehir, a director of credit research at RBC Capital Markets based in London, said in an interview. “Commodity markets are relatively strong, and the long-term outlook is positive.”

By staging a secondary listing in Hong Kong, Glencore hopes to tap into a marketplace that has gained huge significance in recent years.

Hong Kong now attracts a majority of global initial offering volumes, largely because of a flood of mainland Chinese companies that are choosing to go public. However, non-Asian companies are also increasingly choosing to list in Hong Kong and on other exchanges in the Asia-Pacific region. They hope to tap into a cash-rich investor base and to raise their profiles in a part of the world that is gaining in importance to global companies.

Founded in 1974, Glencore is a closely held company owned by its employees and management. It owns slightly more than a third of the global mining company Xstrata.

“An I.P.O. is the next logical step in our development and strategy,” Ivan Glasenberg, the chief executive, said in the statement. “It will provide us with the financial flexibility to capitalize upon long-term growth opportunities throughout our business and achieve further sustainable growth.”

Glencore intends to use about $5 billion of the I.P.O. proceeds for capital expenditures over the next three years. Becoming a public company will allow Glencore to use its shares to make larger acquisitions than it could with only its cash reserves, a goal it confirmed Thursday, saying it would “continue to pursue selective strategic acquisitions.”

The company said it planned to raise its stake in the Kazakh metal mining company Kazzinc to 93 percent, from 50.7 percent, using $1 billion worth of new Glencore shares and $2.2 billion in cash.

But another major target may be the whole of Xstrata. The merger, which has been widely speculated, would create one of the world’s largest mining and commodities companies, worth as much as $100 billion.

Glencore has said that it sees value in the combination of the two companies, and while there is no offer on the table, a successful I.P.O. would give the trader a stronger hand in bidding for Xstrata. That decision, however, would have to be made by the new board proposed Thursday in the filing, which would take seats after the offering.

“The upside to a Glencore-Xstrata merger is benefits of scale,” said Ms. Hehir of RBC Capital Markets. “With a potential market cap well in excess of $100 billion, they would be better placed against resource behemoths like BHP Billiton, Vale and Rio Tinto.”

Separately Thursday, Glencore named Simon Murray, a former executive of Hutchison Whampoa, the Hong Kong conglomerate controlled by Li Ka-shing, to be its nonexecutive chairman.

Chris V. Nicholson contributed reporting from Paris.

Article source: http://feeds.nytimes.com/click.phdo?i=c5602abcdb6d5750190b5309bb56a960

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