Glencore shares up on asset-sale talk

A cargo ship docked at the Viterra Cascadia terminal, owned by Glencore, in Canada. The commodity trading and mining company is planning to sell assets in a package of measures to pare its debt.
A cargo ship docked at the Viterra Cascadia terminal, owned by Glencore, in Canada. The commodity trading and mining company is planning to sell assets in a package of measures to pare its debt. PHOTO: BLOOMBERG

Stocks soar 72% in HK amid reports that GIC and others are eyeing stake in farm business

LONDON • Glencore shares jumped the most on record in Hong Kong after reports that the commodities giant is talking to potential buyers, including Singapore wealth fund GIC, for its agriculture business.

Shares in London rose.

The stock in the trading and mining company surged as much as 72 per cent to the highest level since Aug 31 in Hong Kong, extending a period of high volatility into a second week.

Glencore said in a statement yesterday that it wasn't aware of any reasons for the move, or any information that it was obliged to disclose.

London-traded shares jumped 12 per cent to 106.75 pence (S$2.32).

The company's stock was whipsawed last week amid concern that its debt load may be excessive as commodities slump.

The company is planning to sell assets in a package of measures to pare debt that also included a US$2.5 billion (S$3.6 billion) stock sale, spending cuts and stopping dividends.

GIC, Japanese trading house Mitsui, and a Canadian pension fund are among those interested in buying a minority stake in the agricultural business, people familiar with the situation said last week.

"It's definitely looking well-bid and if it's distressed in terms of Glencore's balance sheet, then it's going to get a lot of interest," senior analyst at Morgans Financial in Brisbane James Wilson, said by phone. "The agricultural sector is extremely well looked-at at the moment."

The stock was at HK$12.50 (S$2.30) after surging as high as HK$18.36. The jump in Glencore's trading volume relative to its 100-day average was the highest among shares listed in the city, according to data compiled by Bloomberg.

Mining stocks and commodities were also helped yesterday by data last week that showed United States employers added fewer jobs than expected, dimming prospects for an increase in US interest rates and weakening the dollar. Copper, which gives Glencore about a third of its earnings, rose as much as 1.8 per cent to US$5,193 a metric tonne.

"Ivan Glasenberg has until May 2017 to restructure the business," Sanford C. Bernstein analysts, including Mr Paul Gait, wrote in a report yesterday, referring to Glencore's chief executive officer. Debt is not an existential issue for Glencore, the analysts wrote.

"Glencore is also well-advanced in the sale process for a stake in its agri business," Mr Bernstein said. "The agri business could be worth US$10 billion and demand is high for such products."

The unit had revenues of US$25.8 billion last year and generated about a tenth of the company's earnings.

The business, which supplies everything from cotton to soya beans, could be valued at US$10.5 billion, according to Citigroup, which has been hired by Glencore to run the asset sale along with Credit Suisse Group AG.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 06, 2015, with the headline 'Glencore shares up on asset-sale talk'. Print Edition | Subscribe