Investors seen rushing for a slice of Glencore IPO

LONDON Thu May 5, 2011 6:29pm EDT

A view of Glencore logos in front of the building of the Swiss commodities trader in Baar near Zurich, January 5, 2010. REUTERS/Christian Hartmann

A view of Glencore logos in front of the building of the Swiss commodities trader in Baar near Zurich, January 5, 2010.

Credit: Reuters/Christian Hartmann

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LONDON (Reuters) - Swiss commodity trader Glencore GLEN.UL has lined up buyers for all of the shares in its planned $11 billion mega-float only a day into the sale process, two sources close to the deal said.

Bucking a recent trend for struggling European listings, which have seen investors wait until very late in the typically two-week bookbuild to place orders, Glencore has already received demand for all the shares it is offering, including a 10 percent overallotment option, the sources told Reuters.

"We had a good response on day one; there is a lot of pent-up demand," one of the sources said on Thursday.

The sources said it was too soon to say where in the indicated 480-580 pence per share range the much-anticipated offering would be priced on May 18.

That range, announced on Wednesday, values the company at 36.5 billion pounds ($60 billion) at the mid-point.

But a steep selloff in commodities over the past week, which accelerated into a near record slump on Thursday, may encourage Glencore to price the offering toward the lower end in order to retain buyer interest.

The 19-commodity Reuters-Jefferies CRB index .CRB wiped out more than two-thirds of its gains so far this year, shedding 5 percent on the day, its fifth biggest fall ever. Brent crude oil dived a record $12 at one point.

"The books are covered on the full deal size, including the greenshoe," said one of the sources. "Given the amount of interest we have seen in the transaction, we thought we would be covered pretty early but I think it just reflects ... that the price range was the right price range."

Demand for Glencore shares will also have been boosted by the fact it is due to be fast-tracked into the blue-chip FTSE 100 .FTSE index at the end of its first day of trading.

FIREPOWER

The London and Hong Kong listing, in which Glencore is looking to raise around $7.9 billion from new shares and $2.1 billion from existing shares, will boost its firepower for deals amid a boom in commodity prices. But it will also push it into the public eye after 37 years as a discreet private company.

Glencore's estimate of its future market capitalization puts the company just above the mid-point of a wide $45 billion-$73 billion value implied in its intention-to-float last month. The mid-point of analyst research was around $60 billion, though that excludes proceeds from the offering.

Before the start of bookbuilding on Wednesday, Glencore struck agreements with cornerstone investors who will collectively buy around 31 percent of the total offer, one of the largest cornerstone books to date.

The largest investor, Abu Dhabi's IPIC Aabar, which has already committed $850 million to the listing, also plans to invest an additional $150 million in the offering.

The investors that Glencore is now courting are only being offered a small slice of the company.

Cornerstones aside, if the IPO prices at its mid-point and without a greenshoe, new shareholders would own just 11.3 percent. And if all the owners of Glencore's convertible bond exercise their right to swap their bonds for stock, that figure falls to 10.7 percent, Reuters calculations show.

Glencore's listing, which could be London's largest ever, will make several top directors paper billionaires, with 54-year-old Chief Executive Ivan Glasenberg set to be worth almost $10 billion.

Citigroup (C.N), Credit Suisse (CSGN.VX) and Morgan Stanley (MS.N) are the joint global coordinators for the offer, joined by another 20 banks in lower ranking syndicate roles.

Glencore was not available for comment.

($1 = 0.6052 pound)

(Additional reporting by Clara Ferreira-Marques and Quentin Webb; Editing by Kirstin Ridley, Alexander Smith, Phil Berlowitz)

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