Glencore International AG
The world's largest diversified commodities trader set a price range of 480 to 580 pence per share for the London IPO, said the sources with direct knowledge of the plan.
They declined to be identified because the terms were not yet public.
Switzerland's Glencore, seeking to boost its firepower for deals amid a boom in commodity prices, is due to release a prospectus for the offering with an indicative price range and other details later on Wednesday. Company officials declined to comment ahead of the publication of the prospectus.
Research from two banks underwriting the commodity trader's IPO last month said it was already worth as much as $69 billion, with its earnings set to double in two years.
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.
CORNERSTONE'S 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.
Based on the mid-point of the range, the company was looking to raise $8 billion from the sale of new shares in a primary offering, while its partners planned to raise about $2 billion in a secondary sale, the sources said.
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.
A further 15 percent or $1.5 billion is available in the over-allotment option. At the top of the range, a total of $12.6 billion could be raised.
Twelve cornerstone investors had agreed to buy $3.1 billion worth of Glencore stock, just above 30 percent of the total, one source said. Such investors back many Asian listings, committing to take large, guaranteed stakes and hold them for a minimum period of time.
Abu Dhabi's International Petroleum Investment Co (IPIC) will be the biggest cornerstone investor, with Government of Singapore Investment Corp (GIC)
Glencore has also signed up hedge funds Och-Ziff Capital Management Group
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.
Conditional trading of shares is set to begin on May 19, according to a term sheet seen by Reuters last month.
Glencore is expected to be fast-tracked into the FTSE 100 <.FTSE> 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
(Additional reporting by Denny Thomas and Fiona Lau in HONG KONG and Clara Ferreira-Marques in LONDON; Editing by Chris Lewis and Lincoln Feast)