November 26, 2012 10:47 pm

Big buyer takes Megafon over IPO line

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Megafon has received orders for all the shares in its initial public offering following a bid for more than a 10th of the stock by a single institution on Monday, clearing another hurdle for the controversial Russian deal.

People close to the deal say that shares worth up to $2.1bn have now been ordered, covering the book for the first time at the tail end of a two-week roadshow where the mobile operator was marketed to investors in the US, UK, Europe and Russia.

The crucial line was crossed thanks to the help of one fund that placed orders for more than $170m worth of Megafon shares, say people close to the deal, taking a big bet on the success on what is set to be the biggest IPO by a Russian company since early 2010.

Shares in Megafon – due to be priced on Tuesday – are set to start trading on Wednesday, drawing an end to a tumultuous process where the listing was postponed for three weeks after it took longer than expected to receive approval from the UK Listing Authority.

The group is trying to sell global depositary receipts in London and Moscow at $20 to $25, valuing the business at between $11.2bn and $14bn.

People working on the Megafon deal said the UKLA had been concerned by the fact that Goldman Sachs – a lead bank on the deal – had dropped out of the offering just days before Megafon was to begin its October roadshow.

The investment bank had concerns about an upcoming restructuring of the assets of Alisher Usmanov, the Uzbek-born oligarch and Megafon’s owner, which would put his Megafon stake within a bigger umbrella holding and under the co-ownership of two partners.

Mr Usmanov is set to retain his entire 50 per cent stake plus one share following the IPO. The primary seller will be Sweden’s TeliaSonera, which helped set up Megafon over a decade ago and is expected to sell down its stake from 36 per cent to 25 per cent.

Mr Usmanov has long been a fixture in London as a shareholder of Arsenal football club. He also holds a 25 per cent stake in Mail.ru, the Russian internet group listed in London and Moscow.

Last week it emerged that Lord Myners, a former Labour minister and Marks and Spencer chairman, had joined the board of Megafon.

The relaunched roadshow followed a strong set of third-quarter earnings earlier in November. Net profit at the company rose 19.6 per cent to Rb14.9bn ($470m), while revenue rose 12.3 per cent year on year to Rb71.2bn. The company reported sales of Rb242bn ($7.7bn) for 2011 and a net income of Rb44bn over the same period.

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