U.S. rules could push Glencore to list by mid-May

U.S. rules could push Glencore to list by mid-May
Fri Mar 11, 2011 3:59pm GMT Print | Single Page [-] Text [+]
* Glencore expected to tap U.S. investors in mega-float

* U.S. accounting rules create pressure to list by mid-May

* Commodities trading giant could market over Easter break

By Kylie MacLellan

LONDON, March 11 (Reuters) - U.S. red tape could pressure Glencore to complete an expected initial public offering (IPO) before mid-May or face having to refresh its accounts, potentially delaying its plans.

Although the world's largest commodities trader has yet to decide on whether to go ahead, the clock is already ticking. Under U.S. accounting conventions a Glencore IPO prospectus would need to include financial statements with an audited balance sheet from within the last 135 days.

This is typical when European firms sell shares to big U.S. institutions without having to register with U.S. regulators,

"If you are raising money in the London markets and you are raising anything over about $200 million then the banks will almost inevitably want to tap the U.S. market," Michael Lynch-Bell of Ernst & Young, told Reuters 
Most companies will factor the 135 days into their timetable," Lynch-Bell, E&Y's partner in charge of global mining and metals transaction advisory services, said on Friday.

Glencore's most recent audited financials are for the full year to Dec. 31, which gives it until mid-May. After this point, the accounts would be considered stale. The firm might then have to either push back its IPO to prepare more up-to-date accounts or reduce its access to key U.S. funds.

"May 15 is a fairly firm deadline to avoid the delay of putting additional financial statements together and deal timetables are often prepared on that basis," said Thomas Vita, U.S. corporate finance partner at law firm Norton Rose.

While there are other options available, they are less common. These include selling just to offshore U.S. investors, which would limit the pool of money available to Glencore.


A select group of mining analysts have already been briefed extensively by Glencore on all aspects of its business, giving them the details they needed to come up with a valuation for the privately-held partnership.

The Swiss-based firm is aiming to list in London and Hong Kong in May, and has given the analysts until April 1 to complete their research reports, according to a source close to the situation.

These publications are a key step towards a listing and a prelude to wider pre-IPO investor briefings and roadshows 
There had been speculation Glencore could try to squeeze out an IPO before Easter, which falls towards the end of April.

The standard European listings timetable is usually made up of around 2 weeks of pre-marketing, known as investor education, which is then followed by a roughly two-week period of investment banks securing orders from investors.

With an extended Easter break looming, many firms are scrambling to get their IPOs completed in the next few weeks.

An extra public holiday in Britain due to a royal wedding means there will be just three working days between April 22 and May 2, with many taking advantage of the long break to go away.

With Glencore's analyst research not set to go out until after April 1, it would be difficult to list pre-Easter under the usual IPO timetable, but waiting until May 2 to launch would not leave enough time before its accounts became stale.

One possibility is to go ahead with marketing over Easter.

Given the expected size of the offering, which could be the biggest ever in London, and its high profile nature, interested investors are likely to find a way to be involved regardless of whether it is a holiday period or not.

Alternatively, Glencore could decide to split the offering, marketing it before the extended break and building order books in early May when investors return.

"I wouldn't rule out them being a bit creative with the format," said one banker. (Additional reporting by Clare Baldwin, Jennifer Ablan and Herbert Lash in New York; Editing by Alexander Smith