March 25, 2023

DealBook: Glencore Sets I.P.O. Range, Valuing It at $60 Billion

Glencore, the global commodities trader and miner, set the price range for its highly anticipated initial public offering on Wednesday at 480 pence to 580 pence a share, which at the midpoint values the company at about £36.5 billion, or about $60 billion.

The company aims to raise about $10 billion in its share issue in London and Hong Kong, with $7.9 billion coming from a primary sale. The rest of the shares will be sold by the company’s management.

Glencore is the world’s largest trader of commodities, dealing in metals like gold and copper, as well as energy resources like coal and oil. It also produces many of the commodities at its own mines, and holds about a one-third stake in the global miner Xstrata.

“There is some caution, but also enthusiasm for the deal,” John Meyer, an analyst at the brokerage house Fairfax in London, said in an interview. “They have an almost monopolistic position in many areas of the market. People didn’t realize how big they were.”

“Glencore watched the success of Xstrata, and very quietly, they built up a mining business of their own in companies that weren’t known to be for sale, like Kazzinc,” Mr. Meyer said, referring to the Kazakh metals producer.

The company said that 31 percent of the offer, or $3.1 billion in shares, had already been subscribed to by cornerstone investors, who are locked in for six months after the offer.

More details are expected to be released on the investors with the publication of the London prospectus on Wednesday. The group is expected to include major sovereign wealth and hedge funds.

“We are pleased by the strong investor interest shown,” Ivan Glasenberg, Glencore’s chief executive, said in the company statement, adding that it was “one of the largest cornerstone investor participations ever achieved for an I.P.O.”

A prospectus will be issued May 13 in Hong Kong, the company said, where the issue is also open to retail investors. Shares are expected to start trading on about May 24 in London and May 25 in Hong Kong. If they are sold at the high end of the range cited on Wednesday, they would value the company at up to $65.8 billion.

The Hong Kong retail offer amounts to 31.25 million shares, or 2.5 percent of the total offer. Normally, when companies go public in Hong Kong, they are obliged to offer 10 percent of their shares through public subscription on the exchange, and up to 50 percent if the issue is oversubscribed — but Glencore has been granted a waiver.

Glencore reported $3.8 billion in profit last year, 41 percent higher than 2009. It notched revenue of $145 billion, up 36 percent from 2009. The company also reaffirmed its outlook for this year.

“Despite recent events in Japan and the Middle East, the directors remain confident that economic activity and commodity demand remain robust and that Glencore remains well positioned,” the company said, adding that it would still pay an interim dividend of $350 million in August.

Citigroup, Credit Suisse and Morgan Stanley are serving as joint global coordinators and joint bookrunners for the issue.

Glencore may opt for a 10 percent overallotment, it said, meaning that if demand is large enough, the company will issue additional shares worth about $1 billion.

Founded in 1974, the company was the brainchild of an American oil trader, Marc Rich, and was named Marc Rich Co. until Mr. Rich sold his share in the company to its management in 1994, after which it became Glencore.

The company, based in Baar, Switzerland, has grown from its origins as an oil and metals trader, expanding into grain and coal trading in the 1980s, while moving upstream into the mining and processing of commodities to make it more a natural resources company than a trading house.

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G.E. Plans to Build Largest Solar Panel Plant in U.S.

“For the past five years, we’ve been investing extremely heavily in solar,” said Victor Abate, vice president for G.E.’s renewable energy business. “Going to scale is the next move.”

The plant, whose location has not been determined, will employ 400 workers and create 600 related jobs, according to G.E. The factory would annually produce solar panels that would generate 400 megawatts of energy, the company said, and would begin manufacturing thin-film photovoltaic panels made of a material called cadmium telluride in 2013. While less efficient than conventional solar panels, thin-film photovoltaics can be produced at a lower cost and have proven attractive to developers and utilities building large-scale power plants.

G.E. has signed agreements to supply solar panels to generate 100 megawatts of electric power to customers, including a deal for panels generating 60 megawatts with NextEra Energy Resources.

G.E., a manufacturing giant, operates in a range of energy businesses, from nuclear power plants to natural gas turbines. It has been aggressively expanding its energy portfolio, particularly through acquisitions.

Mr. Abate said G.E. had completed its purchase of PrimeStar Solar, the Arvada, Colo., company that made the thin-film photovoltaic panels. G.E. said the Energy Department’s National Renewable Energy Laboratory recently certified that a PrimeStar solar panels manufactured at its factory in Colorado had set a 12.8 percent efficiency record for cadmium telluride technology. Conventional solar panels typically are 16 to 20 percent efficient at converting sunlight into electricity.

“We believe we’ll be a cost leader, a technology leader and we’re excited about our position in a 75-gigawatt solar market over next five years,” said Mr. Abate.

The global conglomerate’s entry into the highly competitive photovoltaic market is likely to prove a significant challenge to First Solar, the thin-film market leader and the dominant manufacturer of cadmium telluride panels.

Also at risk are start-ups like Abound Solar, a Colorado company that in December obtained a $400 million federal loan guarantee to build factories to manufacture cadmium telluride panels.

G.E.’s initial panel manufacturing capacity will be a fraction of the more than 2,300 megawatts of capacity that First Solar, based in Tempe, Ariz., plans to have online by the end of 2011.

But Mr. Abate said that G.E.’s solar effort would parallel the rise of its wind energy business.

“It’s a $6 billion platform and it was a couple of hundred million dollars in ’02,” he said of the company’s wind division. “When you look at G.E., we’re very good at scale. In ’05, we were building 10 turbines a week. By ’08, we were doing 13 a day.”

But as with its wind business, G.E. will face competition from low-cost, government-subsidized Chinese manufacturers.

The United States government has offered a range of subsidies to help American solar panel makers, including loan guarantees for new factories. G.E. said it was not applying for a loan guarantee but was exploring applying for state and federal manufacturing tax credits. 

Prices for conventional silicon-based solar modules have plummeted 50 percent in recent years and are expected to continue to fall, in large part because of the rapid expansion of Chinese manufacturing capacity. That has put particular pressure on thin-film companies to increase the efficiency of their panels and maintain a technological edge.

Mr. Abate said G.E. would focus on improving the 12.8 percent efficiency of its panels as well as lowering costs.

“We see our way to much higher efficiencies than that,” he said. “We probably can cut costs 50 percent over the next several years.”

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