MOSCOW The head of Nordic telecoms group Teliasonera (TLSN.ST) signed up for MegaFon MGFON.UL stock on Tuesday, an important endorsement for Russia's No.2 mobile phone firm as it prepares to start trading shares on Wednesday.
Sources said the order book for MegaFon's initial public offering (IPO) would close at 0900 EDT on Tuesday after being oversubscribed on Monday evening, with the placement likely to be priced in the lower half of the offer range.
Lars Nyberg, CEO of Nordic telecoms group Teliasonera, said he would buy $2 million of MegaFon shares at the offer price in an expression of his strong belief in the company's prospects.
"As a member of the MegaFon board, making a sizeable investment in the company is a way for me to show my commitment," Nyberg said in a statement issued by Teliasonera.
MegaFon, controlled by Russia's richest man, Alisher Usmanov, is selling global depositary receipts in London and Moscow at $20-$25, potentially raising $1.7 billion to $2.3 billion and valuing the firm at $11.2 billion to $14 billion.
The listing would establish MegaFon as an alternative to New York-listed Russia market players MTS (MBT.N) and VimpelCom Ltd VIP.N. It has been seeking to lure investors with a prospective dividend yield of 7-8 percent.
Questions about corporate governance, however, prompted investment bank Goldman Sachs (GS.N) to drop out of the deal, while the UK Listing Authority signed off on the prospectus only after Usmanov pledged to keep overall control under a deal to restructure his and his partners' assets.
The bookbuilding process, in which MegaFon and its bankers pitched to investors in New York, London, Moscow and elsewhere to drum up orders, was also slowed down by the U.S. Thanksgiving holiday last week.
The deal received a boost after a large global investment fund placed an order for around $280 million worth of MegaFon stock, or more than a tenth of the issue, three sources said on Monday.
One source close to the deal called the quality of the order book "strong", with interest from long-only investors greater than from hedge funds, and buying interest better than when state-controlled Sberbank (SBER.MM), Russia's top bank, recently sold $5 billion in stock.
"I see a reasonable after-market," the source said, referring to likely demand for the shares following the IPO.
Teliasonera is selling down its 35.6 percent stake to just over 25 percent in the offering. MegaFon itself is selling treasury stock it bought in an ownership shakeup last spring.
If syndicate banks exercise an over-allotment option, MegaFon would have a fairly small free float of 17 percent, making it a more natural target for long-term investors than short-term traders.
MegaFon is expected to finalize the placement on Tuesday night, with pricing, allocations and trading to begin on Wednesday.
Morgan Stanley (MS.N) and Sberbank are acting as joint coordinators, with Citigroup Inc (C.N), Credit Suisse (CSGN.VX) and VTB (VTBR.MM) as joint book runners.
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