Goldman Sachs Misses Out on Glencore's $11 Billion Initial Public Offering
Goldman Sachs Group Inc. (GS) missed out on arranging Glencore International AG’s initial public offering, which may be the world’s largest this year.
Citigroup Inc. (C), Credit Suisse Group AG (CSGN) and Morgan Stanley (MS) will manage the IPO in London and Hong Kong, which may raise as much as $11 billion. All nine banks together will earn as much as $250 million in fees, excluding the so-called incentive fees, according to New York-based consulting firm Freeman & Co.
New York-based Goldman Sachs missed out because it doesn’t have a long-term relationship with the commodities trader, said a person with knowledge of the situation, who declined to be identified because the details are private. Goldman didn’t manage the 10 largest Glencore mergers and acquisitions, data compiled by Bloomberg show.
“The way to contribute to a deal like this” is to develop relationships with clients over many years, said Scott Moeller, a professor at Cass Business School in London and a former investment banker. “Everyone has known for a long time that Glencore will go public. You have to make sure you are on board with them and you need to be connected and make the effort over the long term and not just on your reputation.”
A spokeswoman for Goldman Sachs in London declined to comment. A call made to Glencore’s spokesman outside of normal business hours wasn’t immediately answered.
‘Quid Pro Quo’
Bank of America Corp. (BAC) and BNP Paribas (BNP) are joint bookrunners for the IPO along with the three lead banks, according to a statement yesterday. Barclays Plc (BARC), Societe Generale (GLE) SA and UBS AG (UBSN) were appointed co-bookrunners and Liberum Capital Ltd. as a syndicate member.
“They are giving back the rewards of people who have helped them in the past either officially or unofficially,” Moeller said. “It’s a quid pro quo.”
Goldman Sachs ranks first in managing global share sales this year followed by Bank of America and Morgan Stanley, according to data compiled by Bloomberg. Even including Glencore, it will remain in the top position. Goldman ranked third last year.
JPMorgan Chase & Co. (JPM) and Deutsche Bank AG weren’t selected to manage Glencore’s IPO because of a conflict of interest given their role as corporate broker of Xstrata Plc (XTA), according to the data company Hemscott Plc. Glencore owns a 34 percent stake in Xstrata, and Glencore Chief Executive Officer Ivan Glasenberg said yesterday he sees “good value” in combining the firms.
Analysts from the two banks still attended a briefing held by Glencore before the IPO, along with the nine banks now managing the sale, said two people with knowledge of the matter on March 2.
Investment banks normally use the league-table credit to win future assignments. Banks that underwrite equity sales in the U.K. and Hong Kong receive fees averaging 2.5 percent of the amount raised, according to data compiled by Bloomberg.
Glencore may be valued at as much as $67.1 billion before the IPO, UBS said in a research note sent to investors after the commodities trader announced the sale. Bank of America valued Glencore at as much as $70 billion, it said in a report sent to potential investors on the same day.
Goldman Sachs said on April 11 the risks of investing in commodities outweigh potential gains, dropping its recommendation to buy a basket of raw materials including crude oil, copper, cotton and platinum. Glencore announced its IPO plan on April 14.