Glencore IPO Set To Be Multiple-Times Oversubscribed

Glencore International AG has picked an interesting time to come public, and the IPO set for next week is already getting more interesting.  While Reuters has reported that the firm is cutting off its order book a day early, this multi-billion IPO should begin trading in the middle of next week.  The wealth created from this IPO is going to be about as enviable as its position in the commodities markets today. 

The company is one of the top global integrated producers and marketers of commodities needed by industry.  It has worldwide activities in the production, sourcing, processing, refining, transporting, storage, financing and supply of metals and minerals, energy products and agricultural products.  Customers are in automotive, oil, power generation, steel production, food processing, and more.

On a consolidated basis, turnover for 2010 was translated to $145 billion, and its total assets were listed as $79.8 billion with total shareholders’ funds of $19.6 billion. Glencore’s debt ratings are BBB- (watch positive) at S&P and Baa2 (negative) at Moody’s.

Our indications are that the deal is already oversubscribed despite what we have seen in the currency and commodities markets in the last two weeks.  It seems that the global thought process is that Glencore’s operations are running well whether or not the commodities markets went ballistic or not.

If the overallotment option is exercised, which would seem likely at this point, the trading outfit will raise over $10 billion.

Glencore holds some $30 billion or more worth of commodity holdings.  After you convert for currencies, Glencore’s market value at the IPO pricing is roughly $60 billion based upon the initial price range of 480 pence to 580 pence per share. Of the IPO, it looks as though about 80% is primary sales and about 20% of the shares will be sold as secondary shares by holders.

Unfortunately, US investors were locked out of the electronic versions of the prospectus.  The U.S. was not alone.  The same applied to persons located in Canada, Japan, The People’s Republic of China, Australia, and South Africa.

Citigroup, Credit Suisse and Morgan Stanley are the leading book-runners for the offering and the deal will be dual-listed in London and Hong Kong.  In addition, BofA Merrill Lynch and BNP Paribas are joint bookrunners. Barclays Capital, Société Générale and UBS have been appointed as co-bookrunners. Credit Agricole, HSBC and ING have been appointed as joint lead managers. ABN AMRO, DBS, Liberum, Natixis, RBS and Santander have been appointed as co-lead managers. Bank of China, Commerzbank, Mizuho, Rabobank, Sberbank of Russia and Standard Chartered have been appointed as co-managers.

JON C. OGG