Glencore Surges 72 Percent in Hong Kong Amid Unit Sale Talks

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  • Company says unaware of reasons for share price movements
  • London shares jump 12% as gains trimmed in Hong Kong

Glencore’s Wild Ride Extends Amid Unit Sale Talks

Glencore Plc jumped the most on record in Hong Kong after reports that the commodities giant is talking to potential buyers for its agriculture business. Shares in London rose.

The stock surged as much as 72 percent to the highest level since Aug. 31 in Hong Kong, extending a period of high volatility, before paring gains to 17 percent as of 3:23 p.m. local time. Glencore said in a statement on Monday 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 percent to 106.75 pence.

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 $2.5 billion stock sale, spending cuts and stopping dividends. Singapore’s sovereign wealth fund, Japanese trading house Mitsui & Co., 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.

‘Looking Well-Bid’

“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,” James Wilson, senior analyst at Morgans Financial Ltd in Brisbane, said by phone. “The agricultural sector is extremely well looked-at at the moment.”

The stock was at HK$12.50 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 on Monday by data last week that showed U.S. employers added fewer jobs than expected, dimming prospects for an increase in U.S. interest rates and weakening the dollar. Copper, which gives Glencore about a third of its earnings, rose as much as 1.8 percent to $5,193 a metric ton.

“Ivan Glasenberg has until May 2017 to restructure the business,” Sanford C. Bernstein Ltd. analysts including Paul Gait wrote in a report on Monday, referring to Glencore’s chief executive officer. Debt is not an existential issue for Glencore, the analysts wrote.

Sale Process

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

The unit had revenues of $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 $10.5 billion, according to Citigroup Inc., which has been hired by Glencore to run the asset sale along with Credit Suisse Group AG.

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