OAO Alrosa surged to the highest level in almost two years on speculation the world’s biggest diamond producer will sell shares at a premium to the market.
Alrosa added as much as 9 percent today, before closing up 7 percent at 38.79 rubles by the close in Moscow, the highest level since December 2011. The amount of shares traded was equivalent to about 2 times the three-month average. Alrosa closed at 36.255 rubles yesterday.
A combined 14 percent stake in Alrosa will be sold by the Russian government and the Republic of Yakutia, in the country’s Far East, where its main mines are located, the diamond producer said today in a statement. Alrosa itself will sell about 2 percent of treasury stock, with proceeds used to reduce debt, it said. The company is valued at 38 to 44 rubles a share by VTB Capital, Interfax reported today, citing two unnamed people in the banking sector.
“The shares have jumped because they were undervalued,” Andrey Tretelnikov, an analyst at Rye, Man & Gor Securities, said by phone from Moscow. “This is a unique asset, Chinese demand for diamonds will only continue to grow. There’ll be a lot of interest in this deal.”
The share placement will be the first state asset offering since VTB Group’s $3.3 billion May equity sale. The Finance Ministry reduced the forecast for budget proceeds from this year’s asset sales by 86 percent.
Alrosa is selling as economists predict China’s economy probably grew 7.7 percent from a year earlier, according to a Bloomberg News survey. Russia’s Micex Index gained 9.9 percent in the third quarter, the best quarterly advance in almost three years, after the U.S. Federal Reserve unexpectedly decided against reducing monetary stimulus.
“Ultimately there’s a willingness to place this with as many investors as they can,” Mark Richardson, VTB Capital’s global head of equities, said in a Moscow interview today. “You’re going to build a book across all the major institutions, and I think you’ll get appetite from all the major institutions, so it’s not going to be placed into four or five sovereign wealth funds.”
VTB Capital is a bookrunner for the deal along with Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co., Morgan Stanley and Renaissance Capital.
The Alrosa sale will be Russia’s first mining IPO after a unit of GLG Partners delayed Russian coal miner Sibanthracite Plc (SIB)’s planned offering in London in July, citing market weakness and a lack of interest in mining stocks.
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