MegaFon’s IPO Gets City’s Stamp of Approval
Megafon, Russia’s second largest mobile phone company, kicked off its roadshow in New York on Thursday signalling that it is set on carrying out its planned London IPO.
**Structure of the IPO**
The mobile operator, controlled by billionaire Alisher Usmanov, is looking to raise as much as $2.1 billion (£1.32 billion) from its London floatation and if successful, will become the biggest initial public offering by a Russian company since 2010.
According to news agency Bloomberg, MegaFon and its shareholder the Swedish TeliaSonera will sell a combined 15 percent stake for $20 to $25 per global depository receipt for a total of between $1.7 billion (£1.07 billion) and $2.1 billion (£1.32 billion). Morgan Stanley and OAO Sberbank are managing MegaFon’s floatation, assisted by Credit Suisse Group, VTB Capital and Citigroup. Trading of the shares is expected to begin on 28 November.
With its current IPO price, MegaFon will be valued at $11.2 billion (£7.06 billion) to $14 billion (£8.82 billion), compared with a so-called “fair value” of $12 billion (£7.56 billion) to $16 billion (£10 billion) estimated by analysts. “Russian IPOs are often priced with a 10 percent to 20 percent discount to fair value,”
Bloomberg quoted Mikhail Nesterov, analyst at TKB BNP Paribas Investment Partners. “It’s positive that the MegaFon’s price range implies a discount” to larger local competitor OAO Mobile TeleSystems (MBT), or MTS.
!m(/uploads/story/837/thumbs/pic1_inline.png)Five percent of the shares meant for floatation will come from the company’s treasury stock while TeliaSonera will sell 10 percent of its 35 percent holdings. AF Telecom, Mr Usmanov’s vehicle, will not be parting with any shares from its 50 percent stockholdings.
**Suspicions and Doubts Around MegaFon’s IPO**
The UK Listing Authority (UKLA) took three additional weeks to give its IPO approval to the Russian mobile operator. The Financial Times quoted people working on the MegaFon deal to have said the UKLA had been concerned by the fact that Goldman Sachs, initially a leading bank in the deal, dropped out of the offering a day before MegaFon’s October roadshow. Back then the investment bank explained it’s not willing to work on the IPO because of an upcoming restructuring of Mr Usmanov’s assets, which would put the company within a bigger umbrella holding and under the co-ownership of two additional partners.
Given that the UKLA has approved the deal, it seems the ownership structure problems have been resolved to the satisfaction of the British regulator.
In essence, the Russian billionaire is planning to merge its 50 percent stake in MegaFon with other assets under a corporation co-owned by two additional people: Vladimir Skoch, father of Usmanov’s long-time partner Andrei Skoch, and Farhad Moshiri, a co-shareholder with Usmanov in Arsenal Football Club. The new corporation will be called USM Limited with 60 percent ownership by Usmanov, 30 percent for Skoch and 10 percent for Moshiri. All voting rights will be in the hands of the Russian billionaire, who will also own a golden share, giving him with the final decision on all business matters. His other two partners will have no veto power and will not be able to transfer their stakes to someone else without Usmanov’s approval.