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Mon 28 Feb 2011 03:34 PM

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Qatar eyes Glencore stake as IPO talk heats up

Qatari PM says mulling Glencore stake, commodities giant could list in London and Hong Kong

Qatar eyes Glencore stake as IPO talk heats up
London Stock Exchange

Glencore, the world's largest commodities trader, is
briefing analysts ahead of a possible mega-float which could involve Qatar
taking a stake.

If it goes ahead, an initial public offering (IPO) of
Glencore could value the company at as much as $60bn according to Liberum
Capital estimates, making it one of the biggest listings ever seen in London.

Qatar, one of the sovereign wealth funds flagged as a
possible "cornerstone" investor, is considering investing in
Glencore, the country's prime minister said on Monday.

It would be holding a meeting with Glencore in Doha later in
the week, the prime minister added.

A public listing would allow Glencore, a privately held
partnership, to keep growing even if its partners wish to leave. It would
bolster the Swiss-based trader's balance sheet, reassuring credit-rating firms,
and allow it to make major acquisitions using shares as payment.

"While no final decision has been taken, an IPO remains
one of the options," one of the sources said.

Glencore's senior management team led by 54-year-old chief
executive Ivan Glasenberg is meeting sell-side analysts in London "over a
couple of days", the source added.

"This is a presentation to analysts of the company and
its operations. It is educational."

Glencore could float 20 percent or more of the firm,
possibly split between London and Hong Kong, raising up to $16bn.

That would represent a huge payday for investment banks -
perhaps $300m to $400m - but an even bigger bonanza for the 500 or so partners
who own the firm. Their shares could be worth up to $120m on average.

Glencore, whose one-third holding in mining group Xstrata is
a key asset, would also start talking to possible "cornerstone"
investors who would be expected to subscribe to large stakes, another source
close to the situation said.

"There will be some reaching out, some preliminary
conversations are going to be taking place in the near term about that. Maybe
the company will go and meet one or two funds they are interested in," the
second source added.

Speculation that an IPO could be done before Easter, which
falls at the end of April, was premature and it could equally come after that,
the second source said.

"Something like this you can't really rush through and
jam it through, it is a priority not to do that," the source said.

Although Glencore could be listed in both London and Hong
Kong, London would "very much be the primary listing".

The first briefings in such situations are normally with the
analysts working for the banks which have been hired to advise a company on its
options. This can include the so-called global co-ordinators of a possible IPO
and a wider syndicate.

Following such presentations, investment banking analysts
normally have a month to produce so-called "paving" research that is
used to help explain the company to potential investors but is not usually
published to a wider audience.

Once a decision to take this step and produce such research
has been taken, bankers say there are usually a couple of weeks to decide
whether or not to proceed with an IPO.

If Glencore and its advisers do not press the button before
Easter, they would likely have to wait until early May as the UK will have an
extended holiday period during late April as a result of the royal wedding on
April 29.

Citigroup, Morgan Stanley and Credit Suisse have been
appointed to lead Glencore's possible flotation, with other investment banks
scrambling to get a slice of what they hope will be lucrative fees if the IPO
goes ahead.

Several bankers in London said they did not think that the
final group of banks had yet been selected by Glencore.

Some of last year's high-profile deals involved syndicates
of up to 10 banks, prompting accusations that the companies involved were
trying to stifle any negative research.

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