Glencore surges 72% on reports GIC, others eyeing stake in its agricultural business

Glencore headquarters in the Swiss town of Baar.
Glencore headquarters in the Swiss town of Baar. PHOTO: REUTERS

HONG KONG (BLOOMBERG) - Glencore shares jumped the most on record in Hong Kong in heavy trading on Monday (Oct 5) after media reports that the commodities trader is talking to potential buyers, including Singapore sovereign wealth fund GIC, for its agriculture business.

Shares in the trading and mining company surged as much as 72 per cent to their highest since Aug 31, extending a period of high volatility into a second week. The surge in Glencore's trading volume relative to its 100-day average was the highest among Hong Kong-listed stocks, according to data compiled by Bloomberg.

GIC, Japanese trading house Mitsui & Co, and a Canadian pension fund are among those interested in buying a minority stake in the 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," said James Wilson, senior analyst at Morgans Financial Ltd in Brisbane. "The agricultural sector is extremely well looked-at at the moment."

The Telegraph newspaper also reported on Monday, without naming its sources, that Glencore would listen to offers for the whole company, although its management doesn't believe there are buyers willing to pay a fair value in the current market.

Glencore is planning to sell some assets in a package of measures to pare debt that also includes a $2.5 billion stock sale, spending cuts and stopping dividend payments. Glencore stock was whipsawed last week in London and Hong Kong, dropping 29 per cent last Monday before recovering losses by the end of the week in its most volatile week on record.

The stock in Hong Kong was up 43 per cent to HK$15.30 as of 1:41 pm local time.

Glencore's agriculture 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 soybeans 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.

Mining stocks and commodities were also helped by data showing that US employers added fewer jobs than expected, dimming prospects for an increase in interest rates by the Federal Reserve this year and weakening the dollar for a third day. That tends to benefit commodities by making them cheaper in other currencies.

Copper, which gives Glencore about a third of its earnings, rose as much as 1.8 per cent to US$5,193 a metric ton.

Japanese industry houses have been investing in commodity firms of late, including a recent deal where Singapore-listed Olam International Ltd, majority owned by Singapore state fund Temasek Holdings, sold a 20 per cent stake to Mitsubishi Corp for S$1.53 billion.