LONDON Uneasy markets and the canning of two high-profile European listings mean Glencore is likely to put off a decision on whether to push ahead with its flotation until the last possible moment.
Danish outsourcing group ISS postponed its Copenhagen listing on Thursday, only 24 hours after French media group Lagardere put off the initial public offering (IPO) of its 20 percent stake in pay-TV channel Canal+ France.
Both blamed market volatility and uncertainty for the last-minute change of plan.
Glencore, the world's largest commodities trader, has so far played a cagey game, raising expectations of an initial public offering (IPO) by briefing sell-side analysts and getting a potential cornerstone investor lined up in the form of Qatar's sovereign wealth fund.
There is no hard deadline, but if Glencore still wants to float in May, as sources familiar with the situation have suggested, it would need to make up its mind by mid-April as the IPO process normally takes around four weeks.
However, the world's largest commodity trader has made it clear that a listing is just one of the options it is considering. It has so far put off picking the banks to lead an IPO, keeping a number of hopefuls in a state of heightened alert, sources familiar with the situation say.
The firm, led by chief executive Ivan Glasenberg, is unlikely to press on with a public offering if it does not think it is going to get the valuation it wants due to the bout of volatility that has swept across markets in recent weeks.
In January, Liberum Capital estimated Glencore's equity was worth about $60 billion. Valuing Glencore has been made harder by recent swings in the prices of its listed investments, including its largest holding, miner Xstrata.
Xstrata shares, for example, shed more than an eighth of their value from an intra-day peak on March 7 to a low on March 15, before regaining some of that ground.
"Glencore, in my experience, isn't a company to take discounts in anything. I think they'll continue to prepare and make the decision at a very late stage in the process," one mining analyst, who declined to be named, told Reuters.
This view is supported by equity capital market bankers who, while acknowledging that recent equity market jitters do not make an ideal launching pad for a flotation, are convinced that Glencore will take its decision down to the line.
"They don't need to throw the towel in right now. If in two weeks' time the whole nuclear part of Japan is under control, then they can take a more defined view as to what the read-across is for global commodities. If you didn't have to launch today you wouldn't," one banker told Reuters on Thursday.
Glencore was not immediately available to comment.
BANKS ON STANDBY
Glencore is seeking the permanent capital that comes with a listing, freeing it from the uncertainty of a partnership where payouts to departing partners shrink the capital base.
An IPO would also help it make larger acquisitions and could allow it to buy the rest of mining group Xstrata in which it is the biggest shareholder with some 34 percent.
The Swiss-based group would only need to make up its mind a couple of days before proceeding, the first banker added.
"At the moment it's full steam ahead," said a source familiar with the thinking of Glencore's management.
Early pre-marketing feedback was "very strong," the source said, and Glencore's investment story is strengthened by the fact that its business model thrives on market volatility.
The appointment of banks to run an IPO could happen as soon as next week, with as many as 10 in the running in addition to Citigroup, Morgan Stanley and Credit Suisse, who have all been advising Glencore on its options, the source told Reuters.
Another crucial piece of the jigsaw is the appointment of a chairman to replace Willy Strothotte, who until May is also chairman of Xstrata. Glencore will need to have a clearly independent chairman ahead of a listing.
But a second banker said Glencore might decide not to mandate any banks, given the uncertain state of financial markets following continuing ructions in the Middle East and Japan's devastating earthquake and tsunami last week.
If it chose not to proceed with a float this time round, there would be echoes of investment bank Goldman Sachs, another powerful partnership that decided to postpone an IPO when its plans were derailed by market turmoil in the late 1990s. It subsequently completed a successful listing.