Glencore narrows IPO price range

Commodities trading giant Glencore has narrowed the price range for its US$11 billion ($14 billion) initial public offering this week, raising the mid-point - and the group's expected valuation - amid strong investor interest in the flotation despite the recent volatility in raw material prices.

The Swiss group, which owns about 34 per cent of the London-listed miner Xstrata, had previously indicated its shares would list somewhere between £4.80 and £5.80 each. If the shares were to list at the mid-point, £5.30, the business would be valued at about £36.5 billion ($75.7 billion).

But yesterday it emerged that Glencore had narrowed the guidance for its blockbuster listing to between £5.20 and £5.50 a share, raising the mid-point to £5.35 and valuing the business, which will be dual-listed in London and Hong Kong, at closer to £37 billion.

The move was seen as a reflection of strong demand from investors ahead of the start of conditional dealing in the trader's shares at the end of the week. Because of its size, Glencore will be included in the FTSE 100 under the exchange's fast-track rules.

The tighter pricing range suggests investors have shrugged off a slump in commodity prices - copper, oil and other key raw materials nosedived this month. That fall followed a warning on prices from Goldman Sachs, which recommended caution on raw materials in the short term.

Although it is at odds with the volatility in the commodity markets, the indication of strength chimes with comments last week from Glencore's chief executive, Ivan Glasenberg, who said the trading group had not "seen much pullback with the recent drop in commodity prices".

The former coal trader, whose 15.8 per cent shareholding could be worth nearly £6 billion after the float, sought to play down this month's commodity rout, saying "a lot of what has happened ... is the froth" being blown off.

- Independent