THE Hong Kong Stock Exchange is mounting an aggressive bid to lure away part of a float that looked set to be the biggest in London’s history.
Glencore International, the world’s biggest commodities trader and a mining giant valued at £30bn, is planning an initial public offering (IPO) that could generate fees of up to £300m-£600m for its advisers, which include Morgan Stanley, Citigroup and Credit Suisse. The deal is being led by Morgan Stanley’s Franck Petitgas.
According to people familiar with the matter, Hong Kong is muscling in on the IPO of the Swiss-based firm, with Glencore “tempted” to go ahead with a joint listing instead of making London its primary base.
A joint listing would be a blow for London’s status as the world’s premier commodities exchange and a victory for Hong Kong, which is trying to grab market share in the lucrative mining and commodities sector.
Some observers had expected Glencore to pick Hong Kong for a secondary listing, but few were anticipating a fully-fledged dual listing.
A source close to Glencore said: “There are clearly very powerful arguments in favour of Hong Kong. It is a huge source of funds and there is such a dynamism about the region.”
“There’s a lot of discussion about Hong Kong,” said another source familiar with the matter. With a strong Chinese presence, the Hong Kong stock exchange could offer Glencore better access to the world’s biggest resources investors.
Recent figures showed that Hong Kong was the world’s hottest IPO location during 2009, with companies raising over $51bn (£32.3bn) on the exchange.
Earlier this year, UC Rusal, the aluminium producer, and L’Occitane, the French cosmetics company, both surprised the markets by taking their IPOs to Hong Kong instead of Europe.
The company that runs the city’s exchange, Hong Kong Exchanges and Clearing (HKE), recently altered its rules to make it easier for mining companies to float in a bid to beef up its resources listings.
And UK regulators are tightening up their enforcement of the rules. “At the same time as Hong Kong is making it easier, there is a general thought that European regulators are becoming a bit more rigorous as a reaction to the downturn,” says Edward Bibko, partner at Baker & McKenzie. “I think it caused a number of companies to look a bit more seriously at alternatives,” he added.
Glencore, which is based in Baar, Switzerland, posted a turnover of $106.4bn last year. It has also accrued assets valued at $66.3bn and owns a third of FTSE 100 miner Xstrata.
Glencore chairman Willy Strothotte currently chairs the board of both companies, but is due to be replaced at Xstrata next year in a board-room shakeup.
The LSE and Glencore both declined to comment.