Friday June 19, 04:35 AM
UPDATE 1-Commodities giant Glencore considers flotation -FT
LONDON, June 19 (Reuters) - Glencore International AG, the Swiss-based commodities trader founded by Marc Rich to become one of the world's biggest private companies, is considering a stock market listing, the Financial Times reported on Friday.
While the paper said a public offering was not considered imminent, such a move would require Glencore to shed much of the veil of secrecy it has coveted since its 1974 founding, opening up its huge and highly successful oil, coal and metals trading operations to investor, competitor and regulator scrutiny.
But an IPO may now be more palatable as some close to the group view its private, employee-owned structure as inefficient and a barrier to growth, the FT reported, without quoting anyone.
'It is all about finding the right time,' the FT quoted an unnamed banker as saying.
It cited a person familiar with the company as saying Glencore was in initial talks with bankers, adding that any deal was more likely in the medium-term, once commodities prices had improved.
The FT said Glencore had declined to comment on its report, and a spokesman for the firm did not immediately reply to an e-mail seeking comment.
'The obvious reason for listing is the cash. But with that comes a disclosure obligation, and that would be very exciting for the market, given Glencore's relatively colourful past,' ANZ's senior commodities analyst Mark Pervan said.
'It's a well-known company that isn't well known.'
Based in the billionaire enclave of Zug, Switzerland, Glencore has grown in 35 years from a pure trading enterprise to a major producer and processor of raw materials, owning more than a third of UK-listed miner Xstrata (LSE: XTA.L - news) as well as stakes in U.S. Century Aluminum, Russian oil producer Russneft and aluminium giant Rusal, and Australia's Minara Resources.
By combining the global trading expertise of more than 2,000 people in 50 offices across 40 countries with direct access to everything from Philippines copper to Australian coal and Russian crude, Glencore has developed a successful formula that competitors have struggled to match.
But the problems of Glencore's low-profile, publicity-shy approach became apparent in the last quarter of 2008 when the cost of insuring against default on its debt jumped 16-fold as investors speculated about the company's liquidity, the FT said.
As a result, Glencore -- now run by Ivan Glasenberg, who started his career as a coal trader working for Rich in South Africa -- has become in recent months more forthcoming to debt-holders about its financial status, to quell anxiety.
Rich, the former U.S. fugitive who was pardoned by President Clinton in 2001 after 18 years in Switzerland fleeing charges of financial crimes, sold the company to management in 1994.
In March, Glencore reported in a one-page financial highlights statement that 2008 earnings before interest, tax, depreciation and amortisation fell to $6.79 billion, although Standard & Poor's said in April that it expected EBITDA to fall to $2.7 billion-$3.3 billion in 2009-2010 from $4.4 billion last year.
Based on the mining industry's typical market capitalisation of 8-10 times EBITDA, Glencore could be valued at nearly as much as Rio Tinto (LSE: RIO.L - news) , the world's third-largest mining company, which has a market cap of around $65 billion.
Net profit of $4.75 billion, down 8.4 percent, was before exceptional provisions of around $3.7 billion for asset impairments, provisional pricing and inventory adjustments.
Standard & Poor's, which has a stable outlook on Glencore's debt after downgrading it to BBB- last December, said its key refinancing needs will occur in May 2011, when $7.3 billion matures.
(Reporting by David Milliken and Jan Dahinten in Singapore; Additional reporting by Jonathan Leff and Nick Trevethan) Keywords: GLENCORE/
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