Citi, JPMorgan Said Competing for Istanbul Gas IPO Mandate

  • City of Istanbul plans to decide on winning group soon
  • Istanbul plans to use proceeds for infrastructure projects

Citigroup Inc. and JPMorgan Chase & Co. are in competing groups bidding to manage an initial public offering of as much as 51 percent of the gas-grid operator for Istanbul, Turkey’s largest metropolitan area, three people with knowledge of the matter said.

Bank of America Merrill Lynch and Halk Yatirim Menkul Degerler AS are in Citi’s group of bidders, while HSBC Bank Plc and Is Yatirim Menkul Degerler AS are teaming up with JPMorgan, said the people, who asked not to be identified because the matter is confidential. There are other investment banks in both groups, the people said.

An initial 25 percent of the company’s 1.42 billion shares may be sold either later this year or early next year, two of the people said.

Citi, JPMorgan, HSBC, Halk Yatirim and Is Yatirim declined to comment. Bank of America Merrill Lynch didn’t respond to e-mailed questions seeking comment.

Istanbul, which consumes 10 percent of the country’s annual gas, will soon choose the group of financial advisers to manage the IPO of the company, formally known as Istanbul Gaz Dagitim AS, or Igdas, Istanbul Mayor Kadir Topbas said in an interview on Wednesday. 

Igdas, founded in 1986 when Turkey started getting piped gas from the then Soviet Union, is the only distributor in Turkey among tens of grid operators that are exempt from the Ankara-based energy market regulator’s five-year compulsory price tariff, according to the regulator. Turkey sold the grid operator in Ankara, Baskent Gaz, the second largest in the country, to local investors for $1.16 billion in 2013.

Stake Sale

The city council has decided to privatize the company through an IPO instead of a stake sale to an investor, said Topbas. The city received bids from two groups of banks and brokerages, he said.

Istanbul Metropolitan Municipality, which owns 94.5 percent of Igdas, is selling shares to raise funds to finance other infrastructure projects, including eight new metro lines totaling 100 kilometers (62 miles), Topbas said on April 15, according to the state-owned Anadolu Agency.

Igdas has about 5.5 million customers in Istanbul and consumed about 5 billion cubic meters of gas in 2015, according to its website. Sales fell to $2.14 billion in 2014 from $2.4 billion a year earlier, according to the latest financial data on its website. Profit also fell to $125.7 million in 2014 from $146.4 million in 2013.

This is the second attempt to IPO Igdas after a 2010 effort led by Citigroup, Ak Investment and EFG Securities failed over the method used for the share sale and loopholes in legal infrastructure.

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