OAO Alrosa set the price range for its planned share sale at 35 rubles to 38 rubles apiece, valuing the world’s largest diamond producer at as much as 280 billion rubles ($8.7 billion).
The offer price will be announced on Oct. 28, Alrosa said today in a statement. The Russian government and the eastern Republic of Sakha (Yakutia), where the monopoly’s main mines are located, are selling a combined 14 percent stake, while Alrosa will offer about 2 percent in treasury stock.
Russia is struggling to ramp up an asset sale program aimed at balancing the budget and attracting investment to its financial markets, the cheapest among emerging market peers. The Finance Ministry forecasts budget revenue from sales this year of about 52 billion rubles.
“The company will be able to sell shares within such a price range only if it has anchor investors,” Kirill Chuyko, head of equity research in BCS Financial Group, said by phone. “The price range is set high, while we expected the company to offer a discounted 32 rubles to 33 rubles a share, as Alrosa has no track record and isn’t well-known to investors yet.”
Alrosa rose 1.9 percent to 35.459 rubles by 11:03 a.m. in Moscow. Within the past month, the shares jumped as much as 19 percent to an almost two-year high of 38.79 rubles on Oct. 2. Billionaire Suleiman Kerimov, who owned from 1 percent to two percent of Alrosa, sold his stake on the market about a month before the share offer, Vedomosti newspaper reported today, citing people it didn’t identify.
To attract investors Alrosa’s supervisory board pledged to pay no less than 35 percent of net income in annual dividends starting from payments for this year.
“Alrosa’s decision is aimed at increasing the investment attractiveness of the company,” First Deputy Prime Minister Igor Shuvalov said of the dividend policy in a separate statement. Russia’s government won’t sell additional stock in the company for at least 180 days after the share sale, he said.
Russia plans to maintain control of Mirny-based Alrosa, which produces a quarter of the world’s diamonds by value and more rough diamonds than De Beers by carat.
State-controlled VTB Capital, acting as a stabilizing manager in Alrosa’s shares sale, may purchase as much as 10 percent of the offered shares within 30 days of the announcement of the offer price, Alrosa said today.
The sale will be the second major state asset offered this year. VTB Group, which owns VTB Capital, sold a $3.3 billion stake in May, boosting its capital and diluting the state’s ownership.
Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and VTB Capital are joint global coordinators and joint book runners of the offering, while Renaissance Capital is a joint book-runner of the offering.
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