Glencore, the world’s biggest commodities trader, is to raise up to 5 billion euros (US$6.3 billion) in one of the biggest flotations on the London stock market, City sources said. Analysts value the company at 45 billion euros.
Proceeds from a flotation will be used to expand the mining side of Glencore’s business, with the Swiss-based company looking at acquisitions in Brazil, Australia and South Africa.
Glencore took the first step toward becoming a public company recently by issuing up to US$2.2 billion in convertible bonds to strategic investors in the US, Singapore and China.
“The mix of investors is typical of what you would expect in a pre-initial public offering,” a commodities banker said.
A flotation is penciled in for next year, but could come earlier if the economic recovery gathers steam and prices continue their upward trajectory.
The company also owns a variety of mining assets and companies. The value of its 34.5 percent stake in Xstrata has risen from £2.2 billion (US$3.25 billion) to £12 billion in 18 months.
Glencore’s increasing openness further moves it away from its roots under Marc Rich, the oil trader who founded Glencore in 1974, but later sold out to management. Some observers suggest preparation for a flotation is the precursor to a merger with Xstrata, which could create a natural resources group valued at more than US$50 billion.
Sources say that the merger option is the preferred route for Ivan Glasenberg, Glencore’s chief executive, and there have been reports that executives have met Xstrata shareholders.
Glencore is seeking a flotation because, as a private company led by a partnership, its growth options are few. Relying on the bond markets limits its ability to make big acquisitions. If it could raise equity on the stock market, the company could expand more rapidly and take much bigger strides along the way.
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