Reuters/Hong Kong
Abu Dhabi’s Aabar Investments has committed to invest $850mn in Glencore International’s $10bn initial public offering (IPO), becoming the biggest cornerstone investor in the offering, according to a term sheet seen by Reuters yesterday. Government of Singapore Investment Corp (GIC), which is already a Glencore bondholder, has injected $400mn into the IPO, making the Singapore fund the second-biggest cornerstone investor. Such investors back many Asian listings, committing to take large, guaranteed stakes and in return agreeing to a lock-up period during which they will not sell their shares. In Glencore’s offer, cornerstones have agreed to a six months lock-up, the term sheet added. Qatar said in March it was considering backing Glencore.The “accounts have agreed to subscribe as cornerstone investors for shares at any price in the range. The tranche...was oversubscribed,” the term sheet showed. Glencore, which set a price range of 480 to 580 pence each for the offer, said it had struck agreements with cornerstone investors who will take up around 31% of the total offer, one of the largest cornerstone books to date.Middle Eastern funds have played a big role in Asian IPOs of late and some are sitting on handsome profits from their previous investments. Last year, Kuwait Investment Authority ploughed $1bn into AIA Group Ltd’s IPO, which has generated about a 33% return over the past six months. Cornerstone investors commit to investing in an IPO before its price is determined. The dominance of mutual funds in the US and European IPO markets precludes the need for cornerstones there, so this kind of early investor is unique to Asia. BlackRock has agreed to invest $360mn, the term sheet showed, while Eton Park and York Capital have agreed to invest $200mn each. UBS Private Bank, Zijin Mining and fund manager Pictet & Cie have agreed to buy $100mn worth of shares in Glencore. Fund manager BlackRock, GIC and Zijin have already invested in Glencore’s convertible bonds. Other cornerstone investors include Credit Suisse Private Bank and Och Ziff, both agreeing to buy $175mn worth of shares, the term sheet showed. Usually, cornerstone investors take up about 20% of medium-size IPOs. But in Agricultural Bank of China Ltd’s record $22.1bn IPO last year, about 25% was sold to cornerstones. “The demand from cornerstones was incredibly strong. It’s evidence of the momentum that is building up in the deal. There is no shortage of interest,” one source familiar with the Glencore offer told Reuters. The presence of cornerstone investors also helps to generate demand from institutions and retail investors. The presence of traditional money managers such as Fidelity and Pictet as cornerstone investors has surprised some. “People are seeing the momentum building in the deal and some are a bit concerned that they may not receive what they want,” the person added. Some cornerstone investors were brought into the deal directly by Glencore’s chief executive, Ivan Glasenberg, the person added. “Glasenberg is very adapt at developing relationships with key players globally. For some, it’s starting from ground zero and leveraging the bank relationship, but a lot of the big important funds, Glencore already knows these people,” the person added. Some big names that failed to show up as cornerstone investors include, Qatar Investment Authority and China Investment Corp. Talks with China’s sovereign wealth funds were stymied by the funds’ cumbersome processes for deciding on and approving major investments, another source told Reuters.