Glencore targets $11 billion as sets IPO price range

HONG KONG/LONDON (Reuters) - Commodity trader Glencore will seek to raise as much as $11 billion from its London and Hong Kong IPO, after securing commitments from key investors including Abu Dhabi.

The world's largest diversified commodities trader set a price range of 480 to 580 pence per share for the London IPO, confirming an earlier Reuters report. At the mid-point of the range that values the company at around $61 billion, in line with early forecasts.

Glencore said it is targeting gross proceeds of around $10 billion, before a 10 percent over-allotment option.

The group is raising the money as it seeks to boost its firepower for deals amid a boom in commodity prices. It is due to release a prospectus for the offering later on Wednesday.

Glencore's price range had been expected to come at the lower end of the wide $45 to $73 billion value implied by numbers released by Glencore in its intention-to-float last month -- below a widely cited $60 billion valuation.

Glencore also said it had struck agreements with cornerstone investors, who will take up around 31 percent of the total offer, one of the largest cornerstone books to date.

According to a separate term sheet seen by Reuters, Abu Dhabi's IPIC Aabar will be the largest cornerstone investor, committing $850 million to the IPO.

"Commodity prices are very high now and growth is on an upswing globally, so the timing is quite good," said Andy Mantel, founder and chief executive of asset manager Pacific Sun Advisors in Hong Kong, who described the offer as fairly valued to a bit pricey.

"It's smart for investment bankers to be conservative in their pricing, so as not to disappoint too many people."

While the prospect of a strong debut for the shares will please some investors, others have questioned Glencore's motivation for going public, its business model and past secrecy as reasons to be cautious on the listing.

CORNERSTONES LINE UP

The long-awaited listing, which could be London's largest to date, will push Glencore into the public eye and will turn publicity shy executives including chief executive Ivan Glasenberg, a former coal trader, into paper billionaires.

The company confirmed earlier reports it is looking to raise around $7.9 billion from the sale of new shares in a primary offering, while its partners planned to raise about $2.1 billion in a secondary sale.

That would value Glencore at about 8 to 10 times estimated 2011 earnings, based on the average forecast of the three banks underwriting the IPO.

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, so investors will be scouring the prospectus for details on the company from its existing investors to its risks and details on its trading.

Glasenberg has never disclosed exactly how much of the firm he owns, though he is expected to be shown in the prospectus to be the top shareholder. Reports have put Glasenberg's stake as high as 15 percent. It will also become clear whether former Chairman Willy Strothotte retains a major stake or not.

Investors polled by Reuters said Glencore may pay a high price for its privacy, with its low profile as corporate governance fears damage its ability to achieve a top price for its stock.

The prospectus is also expected to include details of Glencore's trading in the first three months of the year, along with details of gross fees paid to its advisers -- the first indication of how much the commodities giant will pay its bankers in one of the biggest paydays for the sector this year.

Citigroup, Credit Suisse and Morgan Stanley are the joint global coordinators for the offer.

Conditional trading of shares is set to begin on May 19 in London, with unconditional dealings in London on May 24 and Hong Kong on May 25.

Glencore is expected to be fast-tracked into the FTSE 100

bluechip index at close of business on the first day of trading, given its size and share of the FTSE all-share index. It will be the first company in 25 years to make the leap and only the third ever, after BT and BG.

(Additional reporting by Denny Thomas and Fiona Lau in HONG KONG and Clara Ferreira-Marques in LONDON; Editing by Chris Lewis, Lincoln Feast and Alexander Smith)

(A previous version of this story incorrectley stated the size of the over-allotment option was 15 percent or $1.5 billion. It should have been 10 percent or $1 billion)