Glencore chief set to become $10B man

(FT.COM) -- Ivan Glasenberg will become one of Europe's richest men after Glencore's initial public offering, as the value of his stake in the world's largest commodities trader will surge to almost $10 billion.

The IPO prospectus -- at more than 1,600 pages -- has for the first time revealed the ownership structure of Glencore, which for nearly 40 years has been privately owned. Besides chief executive Mr Glasenberg, four other senior executives will become overnight billionaires and scores will be millionaires.

The massive paper gains for the employees come as Glencore embarks on a radical transformation, abandoning partnership and privacy for a flotation that will expose it to public scrutiny but also give it the financial firepower to participate in the consolidation of the natural resources industry.

Glencore priced its IPO on Wednesday at a level to give it a valuation of $48 billion-$58 billion, shy of the average forecast of $62 billion provided by the banks underwriting it.

Following the issue of $7.9 billion of new shares, the enlarged company will have a market value of $61 billion at the midpoint of the IPO range.

Mr Glasenberg will have a stake of 15.8% of the enlarged company, worth $9.6 billion at the IPO midpoint.

The publicity-shy South African, who joined the firm in 1984 as a trainee in Johannesburg and rose through the ranks, embodies the shrewd qualities that have made Glencore's traders famous.

"For Ivan, trading is a way of life rather than a job," said one executive at a rival firm.

Other top shareholders include Daniel Maté and Telis Mistakidis, co-heads of the copper business, whose stakes will be worth $3.7 billion apiece.

After the IPO Mr Maté will rank as the fourth-richest Spaniard, while Mr Mistakidis will become the second-richest Greek.

American Tor Peterson, head of coal, will own $3.2 billion, while the stake of Briton Alex Beard, head of oil, will be worth $2.8 billion.

Steven Kalmin, chief financial officer, will top the list of millionaires with a $610 million stake.

Glencore did not disclose the identities of the rest of the 500 or so employees who own shares as their stakes are below the 3% limit.

The massive value creation for the company's employees is drawing parallels with Goldman Sachs' flotation in 1999. Both companies share a reputation for secrecy and having a distinctive culture that delivers success. But the Wall Street bank's IPO valued then-chief executive Hank Paulson stake at just $219 million.

The windfall for Glencore's employees has prompted some investors to question whether the IPO marked the staff's cashing in at the top of the commodities cycle. But Mr Glasenberg vehemently denied that was the case in an interview with the Financial Times last month, saying that top employees will be locked in for up to five years. However, Glencore warned potential investors on its prospectus that the flotation could make retaining its top staff more difficult.

"This cultural change could result in certain key employees ... leaving," it said, adding that "compensation payments may not be as effective as the opportunity to receive ownership interest" that existed before the IPO.

Bankers and investors anticipate strong interest in the IPO, the largest to date in London and the third largest in Europe. Glencore has embarked the support of a roster of blue-chip cornerstone investors, including Aabar, one of Abu Dhabi's most sophisticated sovereign wealth funds, and the unusual backing of hedge fund such as York Capital, Brookside Capital and Och-Ziff. The cornerstone investors have taken 31% of the offer, investing $3.1 billion.

Mr Glasenberg on Wednesday said pricing at the low end of the expectations reflected the culture of Glencore, which 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."

Glencore said it expected to announce the final IPO pricing on May 19 and that the shares would be admitted for unconditional dealings in London on or about May 24 and in Hong Kong on or about May 25.

The IPO is set to bring huge fees to the underwriting banks, lead by global coordinators 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.

© The Financial Times Limited 2011

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