16th Sep 2015 11:24
LONDON (Alliance News) - Glencore PLC on Wednesday said it has raised USD2.50 billion after placing a large number of shares as part of the company's major plans to reduce its substantial debt pile in light of the downturn in commodity markets.
The FTSE-100 listed multi-commodity miner and trader had late Tuesday announced its intention to raise USD2.50 billion, or USD1.60 billion through the placing of 1.31 billion shares. On Wednesday, Glencore confirmed the price per share was 125.0 pence.
Shares in Glencore were trading up 0.2% to 128.35 pence per share on Wednesday afternoon.
Following the placing, Deutsche Bank lowered its price target for the miner to 259.0 pence from 265.0 pence but maintained its Hold rating. Deutsche analyst Rob Clifford said while the company would have wanted a higher share price and therefore lower shareholder dilution, the placement removes the uncertainty around timing and form of the issuance.
The equity fundraising plan was first revealed just over one week ago as part of a major plan whereby the company outlined measures worth up to USD10.2 billion to preserve its capital and reduce debt. That plan came a week after credit ratings agency Standard & Poor's revised its outlook on the company's credit rating to Negative from Stable.
The company has been hit hard by the downturn in commodities markets, especially in iron ore and copper which have both been particularly hit, and by its exposure to the oil and gas industry, which has suffered amid the falling oil price.
The recent slowdown and increased concern about the Chinese economy, which is the largest importer of metals in the world, has also hit Glencore.
The major plan included the suspension of its final dividend for 2015 and interim dividend for 2016 and the mining major also said it would slash capital expenditure across the board alongside working capital. Glencore also plans on raising a total of USD2.0 billion from selling off its non-core assets, some of which have already been disposed of.
In August, UBS analyst Myles Allsop said Glencore would only cut its dividend under a "doomsday scenario".
The move was welcomed by investors, as concern had mounted about Glencore's USD30.0 billion debt pile and the risk that the company's huge commodities trading arm would not be able to access the cheap finance needed to move millions of tonnes of oil, coal and copper globally every day.
The commodities company said 78% of the new shares from the fundraising were allocated through an accelerated bookbuild placing, with the remaining 22% subscribed for by senior managers at Glencore, including Chief Executive Ivan Glasenberg.
Glasenberg purchased 110.1 million shares to hold a total of 1.21 billion Glencore shares, representing a 8.42% stake in the company. Glasenberg remains the largest shareholder in the commodity giant and the 125.0 pence price means he has forked out around GBP137.6 million to take part in the fundraising.
To reflect the downturn in the market and the hammering that Glencore shares have taken, that 125.0 pence price compares to Glencore's IPO price back in 2011 of 530.0 pence per share which created numerous paper billionaires and hundreds of millionaires, including Glasenberg who was considered to have made around GBP6.0 billion from the flotation.
Between the IPO in 2011 and the start of 2014, its share price had tumbled to only 314.05 pence per share and at the start of 2015, around six months after the oil price crash, Glencore shares stood at 301.15 pence per share.
That means the share price of Glencore has dropped by around 58% since the start of 2015 alone, and fallen by over 75% since the IPO in 2011.
The USD10.0 billion raised from Glencore's IPO was the largest fundraising of any international company in London and the largest ever premium listed IPO. The miner was also the first company in more than 25 years to enter the FTSE 100 on its first day of trading.
Telis Mistakidis, director of Glencore's copper business purchased 41.4 million shares for around GBP51.8 million to hold a total of 456.2 million shares, representing a 3.17% stake and Daniel Mate, co-director of the same division bought 42.2 million shares for around GBP52.8 million to hold a total of 464.1 million shares, representing a 3.2% stake in the business.
Citigroup Global Markets Ltd and Morgan Stanley & Co International PLC were the joint bookrunners on the placing, with Barclays Bank PLC named as a co-bookrunner.
Deutsche analyst Clifford said Wednesday: "The job for the team now is to deliver the additional USD7.5 billion of debt reduction measures and, importantly, clearly articulate what the equity story is for Glencore post the dilution and dividend cut."
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Glencore