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Mon 2 May 2011 03:36 PM

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Abu Dhabi, hedge funds to back Glencore's London listing

UAE's capital could make investment in Glencore via ADS, a recently established trading house

Abu Dhabi, hedge funds to back Glencore's London listing
Glencore is preparing to float in London and Hong Kong, with a prospectus and an initial price range due on Wednesday

An Abu Dhabi vehicle, big hedge fund managers and Swiss private banks are set to serve as "cornerstone" investors backing commodity trader Glencore's $12bn flotation, a person familiar with the matter said.

The listing, which could be London's biggest ever, will be aided by strong support from cornerstones, who could buy nearly 30 percent of the shares sold - or some $3.6bn worth, if the listing raises its maximum target of $12.1bn.

Such investors back many Asian listings, committing to take large, guaranteed stakes and hold them for at least six months.

Glencore, the world's largest diversified commodity trader, is preparing to float in London and Hong Kong, with a prospectus and an initial price range due on Wednesday.

Several existing investors in Glencore's convertible bonds will also serve as cornerstones, including US fund manager BlackRock, Government of Singapore Investment Corp (GIC), and China's Zijin Mining, the person added. The bond issue 18 months ago was one of Glencore's first steps toward public life.

The final roster of cornerstones could still change before Wednesday, but is likely to include at least three large hedge funds as well as representatives of the private banking industry in Glencore's native Switzerland, the person said.

Glencore will also publish a price range that could place a minimum value on the company of less than $50bn including new funds, the person said - below a widely cited $60bn valuation, but within a wide $45 to $73 billion range implied by Glencore's own figures.

Abu Dhabi's big state fund, Mubadala, plans to invest about $16bn this year. But the emirate could instead make its investment via Abu Dhabi Sources, or ADS, a recently established trading house that is targeting some of the same commodities Glencore markets.

However, other sovereign wealth funds in Asia and the Middle East will not invest in the listing - Zijin is likely to be the only Chinese cornerstone, and Abu Dhabi the sole Middle Eastern backer, the person familiar with the matter said.

Media reports have suggested state funds from China, Korea, Kuwait and elsewhere could invest, while Qatar said in March it was considering backing Glencore.

Last week sources with direct knowledge of the matter said Glencore was in advanced talks about a cornerstone role with China's State Administration of Foreign Exchange (SAFE).

SAFE manages the bulk of China's $2.85-trillion foreign exchange reserves, while China Investment Corp (CIC) manages about $300bn.

However, talks with China's sovereign wealth funds were being stymied by the funds' cumbersome process for deciding on and approving major investments, the person said on Sunday.

Glencore declined to comment.

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