Moscow – Last week Severstal announced the issue of its first IPO. Before the end of the year 2006, shares of the company will be publicly traded on the London Stock Exchange. The current owner of the company, Alexey Mordashov, is planning to maintain control over his company even after it goes public.
According to the London Stock Exchange website, Severstal will place GDR on LSE for the regular shares of the company. The actual IPO seller will be Frontdeal Limited, a company registered in Cyprus. The banks coordinating the shares allocation are Citigroup, Deutsche Bank and UBS Investment Bank. The owner of the Cyprus offshore company which owns 38% of Severstal is Alexey Mordashov. According to publicly available information, through his holdings in many different companies Mordashov controls over 90% of Severstal.
Alexei Mordashov
In the past, Mordashov was planning to exchange his controlling share for 32% of the steel company Arcelor. However, share holders of Arcelor voted for another deal at the end of June, and Arcelor merged with the largest steel producer in the world, Mittal Steel. After the Mordashov’s deal didn’t go through, Severstal started preparing to issue this year’s IPO.
During the preparations for the IPO, Severstal will create a board of ten directors, half of which, including the chairman of the board, will be independent. The board will become part of a corporate executive structure, which will meet UK regulatory standards. The company’s press-center said that Severstal is already searching for the candidates who “have large international experience and flawless reputation in the industry and in investment markets.” No names of the senior executive candidates have been released.
Alexey Mordashov also confirmed his desire to take back his position of CEO, placing the present executive, Anatoly Kruchin into position of CEO of Cherepovezky Metkombinat. Mr. Mordashov is open about his goals for the IPO and re-structuring of the company, his goal is “to take leadership in consolidating the world steel industry.”
According to financial analysts in Russia, the IPO is not aiming at gaining extra cash; instead the offering will be issued to determine the market value Severstal shares. Even though there are no numbers available in relation to how big the offering will be, it is clear that no single investor or group of investors will be able to buy a large share of the company.
Financial specialists say that the IPO will release only 10% of the company shares, so Alexey Mordashov keeps 75%+1 of the company stock. The issued 10% stock will be worth $1.2 – 1.3 billion; the entire company is valued at $12-13 billion. Analysts predict that the IPO will extend stocks to portfolio investors only; the goal will be to raise $2 billion.
Mordashov will make sure that he doesn’t lose any control of the company by conducting the extra emission of the shares, which will be bought by different companies, which belong to Mordashov and already control Severstal. This IPO structure allows Mordashov make the final decision on how much each minority stakeholder will own. The emission favoring the current owner will be embedded into the IPO.
Russian financial specialists say that Mordashov is simply insuring his assets; if the IPOis successful, more of Severstal will be offered to outside investors. The IPO profits will go towards modernization of Russian steel production and purchasing more shares in the industry.
