July 13, 2011 / 11:12 AM / 8 years ago

Phosagro raises $538 million in London IPO

MOSCOW (Reuters) - Russian fertiliser group Phosagro (PHORq.L) (PHOR.RTS) priced its initial public offering at the bottom of an indicated range, shrugging off stock market volatility to raise $538 million (337 million pounds) for shareholder Andrei Guryev.

Wednesday’s listing in London saw Phosagro become the seventh Russian company to float on overseas markets this year as private business owners seek to tap capital markets that have rebounded following the financial crisis.

The offer valued Phosagro, whose chairman and 10 percent shareholder Vladmir Litvinenko supervised Russian Prime Minister Vladimir Putin’s PhD thesis, at $5.2 billion against an early analyst estimate of $6.04 billion to $8.77 billion.

“They definitely were not greedy,” said one investor who took part in the IPO. He added he believed the order book was nearly two times subscribed.

Uralsib analyst Vadim Kotikov said Phosagro was valued with a discount to Minnesota, U.S.-based rival Mosaic (MOS.N), with the Enterprise Value (EV) to Earnings Before Interest, Taxation, Depreciation and Amortisation (EBITDA) at around 6.

“If we assume that Mosaic multiples are fair, Phosagro has at least 10 percent upside potential, in reality around 20,” Kotikov said.

“I think that the price met market expectations. The shares have good potential, taking into account the good state of the fertiliser market,” Otkritie bank analyst Denis Gabrielik said.

Fertiliser has been a hot sector in 2011 due to growing demand for food supplies and biofuels.

Phosagro priced its IPO at $14 per global depositary receipt, or $420 per share, compared with a GDR price range indicated at $14.00-$14.50. The original range was $13.00-$16.50.

Proceeds from the IPO could increase to $594 million if an overallotment option is exercised in full, taking the size of the stake sold to 11.4 percent.

The GDRs were trading at $13.99 at 1020 GMT (11:20 a.m. British time).

VOLATILE MARKETS

More than 20 European IPOs have been pulled this year amid volatile equity markets, and investors have lost money on almost all the floats which have gone ahead.

On Wednesday, Ukrainian sunflower oil producer ViOil shelved plans for a $330 million Warsaw listing due to weak market conditions.

Russian firms, in particular, have struggled to convince potential investors to part with their cash, and many have had to cancel their plans after buyers baulked at valuations.

While investors have been especially reluctant to buy existing shares sold by wealthy businessmen, rather than new shares to fund growth, Phosagro boosted its attraction by promising to be a dividend payer.

Phosagro said management bought around $3 million worth of shares in the IPO, and that chief executive Maxim Volkov planned to purchase shares worth about $2 million after the IPO.

It also said petrochemical company Sibur bought shares but did not disclose the size of the purchase.

Guryev and his family own a 70.9 percent stake after the IPO.

Citi, Renaissance Capital, Troika Dialog, Credit Suisse and BMO Capital Markets acted as joint bookrunners for the offering, and Raiffeisen acted as co-lead manager.

Additional reporting by Natalya Shurmina in Yekaterinburg and Kylie MacLellan in London; Editing by Dan Lalor and Mike Nesbit

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