October 8, 2010 10:46 pm

Investors offered a slice of Facebook

One of Facebook’s biggest backers is poised to offer City investors a rare chance to take an indirect stake in the social networking site via the London listing of a subsidiary worth up to $5bn (£3.1bn).

Mail.ru (formerly known as Digital Sky Technologies) is Russia’s largest internet group, and also owns about 10 per cent of privately held Facebook. It intends to float a subsidiary – also called Mail.ru – that includes the majority of the company’s Russian assets and part of the Facebook stake. Marketing to potential investors will start as early as Monday.

Mail.ru’s largest investors are Alisher Usmanov, the Russian oligarch and Arsenal football club’s second-biggest shareholder, and two associates: Yuri Milner, the group’s chief executive and a former physicist, and Grigory Finger, a Russian businessman.

The company has hired Goldman Sachs, JPMorgan and Morgan Stanley to run the listing, and held an analyst meeting earlier this month to prepare marketing material, people close to the company said.

Virtually unknown outside Russia until it purchased an initial 2 per cent stake in Facebook last year, Mail.ru has quietly become a fixture in Silicon Valley. It is a key shareholder of groups ranging from ICQ, an instant messaging service purchased from AOL, to Zynga, the online games provider and creator of Facebook game FarmVille.

The IPO will offer a stake of about 25 per cent in the London listed subsidiary. The subsidiary will include about a quarter of the group’s shareholding in Facebook, and stakes in Russia’s two biggest social networking sites, Vkontakte and Odnoklassniki, and Mail.ru, the country’s largest e-mail provider.

DST purchased a 2 per cent stake in Facebook for $200m last year, valuing the social networking site at $10bn, and is now estimated by analysts to have increased its stake to about 10 per cent by buying shares from Facebook employees. The remainder of the group’s stake will remain in the hands of DST Global, its holding company for foreign assets.

The group decided to include part of the Facebook stake in the listing to generate more interest in the company among global investors.

People close to Mail.ru warned the group could still choose to postpone its listing if market conditions deteriorated.

Mail.ru and its three advisers declined to comment.

The City listing is expected to be the biggest flotation from the former Soviet Union since Russian developer PIK’s $1.9bn offering before the crisis, and comes after regional peers dropped plans for London listings amid poor market conditions earlier this year.

In April, Uralchem, the Russian fertiliser producer, pulled a $600m London listing, while Prof Media, the Russian media group controlled by oligarch Vladimir Potanin, cancelled its $1bn City offering.

Bankers working on Russian offerings said that a successful float for Mail.ru might open doors for issuers that might not otherwise make it.

The listing by Mail.ru is one of at least three City listings by Russian companies expected before the end of the year.

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