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Evraz Raises $422M In Soft London IPO

Published: June 3, 2005 (Issue # 1075)


LONDON - Russia's biggest steelmaker Evraz Group made a quiet London debut on Thursday after raising $422 million in an initial public offering (IPO) that valued the steel and mining group at $5.1 billion.

Evraz ranks among the world's top 15 steelmakers and joins a wave of Russian firms listing in London, after telecoms group Sistema raised $1.6 billion in February and retailer Pyaterochka wrapped up an IPO last month.

Two and a half hours after trading opened Thursday, Evraz global depositary receipts (GDRs) were trading at $14.38, down 0.8 percent from their IPO price of $14.50.

Analysts said the decline was in line with European peers, but that Evraz, as a new entrant, was likely to suffer more from any negativity towards the sector.

"If people get cold feet on the steel cycle, they'll punish this one more than the rest," said one, declining to be named.

Steelmakers have benefited from strong demand from China in recent years but prices have slipped back lately.

Evraz Chief Financial Officer Pavel Tatyanin said this was caused by a winding down of stocks and that high iron ore and coal costs should continue to underpin steel prices.

"It's very good news for us because we pursue an integrated model and we source more than 50 percent of our iron ore and coal internally," he said.

Evraz sold 29.1 million GDRs, or 8.3 percent of its issued share capital, in its IPO at $14.5 apiece. The firm had set an indicative price range of $13.5 to $17 per GDR.

There is an over-allotment option of up to 4.37 million GDRs, which could raise a further $63.3 million if exercised by investment bank Morgan Stanley.

Despite strong world demand for steel, some brokers saw the lower-end pricing of Evraz GDRs as a reflection of the metal market's volatility.

"Current market sentiment regarding steel stocks clearly affected the placement price, as steel shares have shown considerable weakness globally over concerns about future prices for the metal," Aton brokerage said Thursday in a research note.

"By placing the shares at the lower end of the original range, Evrazholding has not capped potential upside, while the high end of the range would have stretched valuations a bit too much," the note said.

Controlled by CEO Alexander Abramov, Evraz produced 13.7 million tons of steel in 2004.

The firm controls the Zapadno-Sibirsky, Nizhniye-Tagilsky and Novokuznetsky steelworks and has said it will use the IPO proceeds to buy mining assets in Russia and Ukraine, as well as downstream operations outside Russia.

(Reuters, SPT)





 


ALL ABOUT TOWN

Monday, Sept. 15


Angelic music will ring out in the city during this week’s Third International Harp Competition. Hosted by the Shostakovich Philharmonic in collaboration with the Ministry of Culture of the Russian Federation, the country’s best musicians with 40 to 47 strings will convene to find out who’s best.



Tuesday, Sept. 16


Lenexpo plays host to Tekhnodrev, a three-day convention that focuses on the woodworking industry in Russia. Promoting the latest technologies and trends, the event features not only exhibitors from some of Russia’s largest woodworking companies but representatives of the forestry industry, who will have their own coinciding forum.


Parlez-vous français? We don’t here at The St. Petersburg Times but that doesn’t mean you can’t. Join the British Book Center’s French Club meeting this evening at 6 p.m. in their location near Technologichesky Institut metro station.



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