Details of the price range confirm a report by the Financial Times on Tuesday.
The flotation is the largest ever in London and the third largest in Europe, after the privatisations of Deutsche Telekom and Enel of Italy in the late 1990s. Glencore has said it expects to become only the third company – and the first in 25 years – to enter the bluechip FTSE 100 index on the first day of trading.
The lower than expected pricing comes in spite of strong demand from cornerstone investors, who are set to take about a third of the IPO, The move is aimed at generating a share price rally for the company after its flotation, bankers said.
Ivan Glasenberg, Glencore chief executive, said in a statement that the Swiss-based trading company had built its business over decades on long-term mutually “beneficial relationship” with customers and capital providers.
“We believe that the price range of our offer continues that approach and we look forward to welcoming new shareholders as long-term partners in our growth,” he said.
Glencore said in its filling that cornerstone investors had taken 31 per cent of its flotation, “one of the largest cornerstone books by value ever achieved for an IPO”.
Abu Dhabi will lead the roster of cornerstone investors, which in exchange for a six-month lock-up period will obtain a guaranteed allocated stake in the sale.
Aabar, a unit of Abu Dhabi’s International Petroleum Investment Company, will invest $850m, with another $150m to be bought during the bookbuilding process, according to two people familiar with the deal. As such, the emirate is set to become Glencore’s largest shareholder, after the company’s employees.
GIC, Singapore’s sovereign wealth fund, will take $400m, the second largest stake. The fund is already invested in Glencore through a convertible bond issued in 2009.
BlackRock and Fidelity, the fund managers, are set to take $360m and $215m, respectively. Swiss banks Credit Suisse, UBS and Pictet will also take part. Zijin Mining, the Chinese group, will buy as well as several other institutional investors, including hedge funds Och Ziff, Eton Park and York Capital.
Aabar, one of Abu Dhabi’s higher-profile investment funds, has assets valued at about $13bn, from stakes in Italy’s UniCredit bank and German luxury car maker Daimler. IPIC, meanwhile, also has investments in oil refiners Cosmo Oil of Japan, Cepsa of Spain and Austria-based OMV.
Aabar, chaired by Khadem al-Qubaisi, is an investment vehicle of IPIC, a government wealth fund founded in 1984 that focuses on energy investments and is overseen by Sheikh Mansour bin Zayed Al Nahyan, a senior member of Abu Dhabi’s ruling family. Sheikh Mansour, who also owns Manchester City football club, used IPIC to invest in Barclays, the UK bank, during the financial crisis.
Mr Glasenberg last month broke a decade-long silence ahead of the IPO, saying that the flotation would give Glencore the financial firepower it needed as consolidation gathered pace.
In an interview with the Financial Times, the company’s chief executive mapped out a strategy of “opportunistic” acquisitions on a much larger scale than in the past and said it would make sense to combine with Xstrata, the London-based miner in which Glencore owns a 34 per cent stake
The company provided a brief update on its financial performance in the first quarter, saying that trading operations began 2011 “strongly”, particularly in its oil division. Its industrial activities, which include mines, oilfields and farming, delivered a “substantially improved performance” on the back of rising commodity prices and “assisted by year-on-year production increases at many operations”.
“Strong market conditions experienced in the first quarter are continuing into the second quarter of 2011,” the trader said, adding that despite recent events in Japan and the Middle East it remained “confident that economic activity and commodity demand remain robust”.
Glencore said it expected to announce the final IPO pricing on May 19 and added that the shares would be admitted for unconditional dealings in London on or around May 24 and in Hong Kong on or around May 25.
The IPO is set to bring huge fees to the underwriting banks, lead by global co-ordinators Citigroup, Credit Suisse and Morgan Stanley. BNP Paribas, Société Générale, Bank of America Merrill Lynch, Barclays Capital, UBS and Liberum Capital will also participate in the shares sale, Glencore said.
The group also announced new additions to its banking syndicate, naming Crédit Agricole, HSBC, ING, ABN Amro, DBS, Natixis, Santander, Bank of China, Commerzbank, Mizuho, Rabobank, Sberbank of Russia and Standard Chartered.