HONG KONG/LONDON (Elzio Barreto and Clara Ferreira-Marques) - Top commodity trader Glencore aims to raise up to $12.1 billion with a dual listing that will boost firepower for deals at the height of a resources boom and make paper fortunes for its publicity-shy partners.
The long-awaited details of the offer, set to be the largest ever in London, were outlined in an intention-to-float that confirmed an earlier Reuters story. They did not, however, include the appointment of a new non-executive chairman -- a requirement for its listing.
The absence, though not unheard of at this stage in the listing process, was unexpected and underscored concerns about Glencore's corporate governance among some potential investors.
"It is an important decision, we are just working through the final process. We have chosen someone, so we should announce it shortly," Chief Executive Ivan Glasenberg said in a telephone interview with Reuters, declining to comment further.
Three candidates were on the shortlist days before the document was published, including former French Foreign Legionnaire Simon Murray and two others. The new chairman will sit on an eight-strong board alongside Glasenberg.
Five non-executive director positions were announced with Thursday's statement, but at least one of the directors, Peter Coates, has previous direct links with the group. He was chairman until earlier this week of Minara Resources, a nickel producer majority owned by Glencore.
Tony Hayward, former head of BP ousted over his handling of the Gulf of Mexico oil spill, will be the senior independent director.
Glencore, the world's largest commodities trader, joins the dots of the global economy -- mining, producing and shipping raw materials across the globe to carmakers, oil companies, utilities, steelmakers and food giants.
Founded in 1974 by trading sensation and later U.S. fugitive Marc Rich, Glencore has until now held on to a fiercely prized tradition of public discretion, but its May listing will propel the group and its top management it into the limelight.
The sale, which has generated a buzz akin to Goldman Sachs' listing in 1999, will generate millions of dollars in paper windfalls for Glencore's executives -- not least Glasenberg himself, said to own a 15 percent stake in the firm. But all have been blocked from selling for up to five years.
Glasenberg has always declined to comment on his ownership, though his stake will be made public in the prospectus.
"All partners are invested for the long term. No one is taking money off the table," Glasenberg said.
"Glencore is a commodities trader and less vulnerable to commodity prices," said Helen Lau, an analyst at UOB Kay Hian. "The sheer size of trading volume in commodities will continue to rise globally. Investors probably will be very interested in the IPO, given the commodities prices are so high now."
Prices of copper and other commodities have traded at record-highs recently, with the Reuters-Jefferies CRB index .CRB, a global commodities benchmark, up more than 8 percent since the beginning of the year. The index has been trading near its strongest level since September 2008.
Glasenberg said on Thursday that Glencore had received a "very positive" reception from most investors when management travelled the world to gauge demand for the deal.
Analysts and fund managers agreed the deal would find demand, despite ongoing volatility in the markets and a continued nervousness around new issues, with many pulled or sold at the low end of their ranges.
"People want a different way to play the cycle and the business as a whole of mining, trading and selling commodities so this will definitely be a welcome addition in terms of a broader access to commodity markets," said Rob Edwards, managing director of metals and mining research at Renaissance Capital.
But many on Thursday were still cautious.
"There are not too many people that have made money out of dealing with Glasenberg and the market is going to do a deal with him," analyst Damien Hackett at Canaccord Genuity said.
Tim Barker, portfolio manager at BT Investment Management in Sydney, said he was concerned by the "frenzy of activity."
"The mining side of the business is relatively straight forward from a resource analyst point of view. It then just comes down to what you consider the trading side to be worth, and that is more difficult."
Glencore is targeting an offer size of between $9 billion to $11 billion. The London part of the offer should raise up to $8.8 billion, while the Hong Kong leg of the deal could raise up to $2.2 billion. After the IPO, the free float is expected to be between 15-20 percent.
If a 10 percent greenshoe over-allotment is exercised, the total IPO proceeds rise to $12.1 billion.
Glencore plans to use $5 billion of the IPO proceeds for capital expenditure over the next three years, while another $2.2 billion will be used to increase its stake in miner Kazzinc. Glencore already owns 50.7 percent of Kazzinc, along with a 34.5 percent stake in miner Xstrata.
It plans to set the price range on May 4 and conditional trading of shares is set for May 19, the term sheet showed.
Glencore is expected to sign up "cornerstone" shareholders to its IPO, but these may be made public only when it publishes its prospectus next month. Glencore officials have met in the past weeks with sovereign wealth funds in Asia and the Middle East, and high net worth investors to garner support.
It is also holding talks with investors in its convertible bond, some of whom have already signaled they will increase their share, according to sources close to the matter. Strategic investors in the bond are expected to almost double their money in just 17 months, according to analysts.
Citigroup, Credit Suisse and Morgan Stanley are the joint global coordinators for the offer.
(Additional reporting by Denny Thomas, Nishant Kumar and Alison Leung in Hong Kong, Miranda Maxwell in Melbourne and Clara Ferreira-Marques, Quentin Webb and Julie Crust in London; Editing by Lincoln Feast, Dean Yates and Sophie Walker)
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