* Seen pricing in lower half of $20-$25 range
* Order book for IPO closed at 1400 GMT - sources
* Global fund cited as large buyer
* Teliasonera CEO buying $2 mln in offering
By Olga Popova and Megan Davies
MOSCOW, Nov 27 Russia's No.2 mobile phone firm
MegaFon is likely to price its stock market float
towards the lower end of its guided range, sources said, in an
offering expected to see the company raise less than $2 billion.
MegaFon, controlled by Russia's richest man, Alisher
Usmanov, is selling global depositary receipts (GDRs) in London
and Moscow, offering an alternative to New York-listed Russia
market players MTS and Vimpelcom Ltd.
The company set a range of $20-$25 per GDR, to raise $1.7
billion to $2.3 billion and valuing the firm at $11.2 billion to
Sources said the order book for MegaFon's initial public
offering (IPO) closed at 1400 GMT on Tuesday after being
oversubscribed on Monday evening, with the placement likely to
be priced in the lower half of the offer range.
Two financial market sources said they expected the offer to
be priced at $20 a share. One source familiar with the matter
said that orders for the offer were submitted at $20-$22.50 a
Sources cautioned there was no decision on price set at this
After months of inactivity due to choppy markets, Europe has
seen a pickup in initial public offerings since the start of
September, but those working on deals say investors remain
choosy about which companies to back and are not willing to pay
over the odds.
Analysts have previously said that the Megafon IPO would
only be interesting to investors if priced at a discount to New
York-listed Russian rival MTS.
"At the low end of the range its at a discount to MTS - at
the high end, it is a premium," said one investor.
MegaFon, which declined comment, is expected to finalise the
placement on Tuesday night, with pricing, allocations and
trading to begin on Wednesday.
The offering would be the largest by a Russian company since
aluminium firm Rusal floated in Hong Kong in 2010.
The float earlier received an important endorsement when the
head of Nordic telecoms group Teliasonera, which is
selling down its stake, signed up for MegaFon stock.
Teliasonera CEO Lars Nyberg 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.
Questions about corporate governance had prompted
investment bank Goldman Sachs 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.
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, 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
Morgan Stanley and Sberbank are acting as joint
coordinators, with Citigroup Inc, Credit Suisse
and VTB as joint bookrunners.