Severstal Announces London IPO By End Of Year

Oct. 6, 2006
Move is seen as way of advancing Kremlin ambitions for a national metals champion which could compete globally

Number two Russian steel maker Severstal announced on Oct. 6 plans to float its shares in London, advancing Kremlin ambitions for a national metals champion to compete globally. "Severstal announces today its intention to list Global Depositary Receipts (GDRs) representing its ordinary shares on the London Stock Exchange," it said in a statement on the initial public offering.

Russian billionaire Alexei Mordashov, who owns 89% of Severstal through various investment vehicles, said in July that the company could list up to quarter of his own holding worth as much as 3.0 billion euros (US$3.8 billion). Moscow stock exchanges currently trade seven percent of the company, which has a market capitalization of 10.9 billion dollars (US$8.6 billion).

Analysts say that a big merger in the metals sector is backed by Russian President Vladimir Putin, who is pushing for the creation of Russian national champions in the natural resources sector that will have global reach.

Earlier this year, Severstal lost a much-publicized battle to merge with European group Arcelor, which instead agreed to merge with Mittal Steel, the world's largest steel group.

Mordashov said in July after the bid failed that he saw an IPO as the best way to establish an objective valuation for his shares ahead of pursuing other mergers.

Renaissance Capital metals analyst Yury Vlasov said that in addition to Severstal raising capital through the IPO, "it is just as important for further merger and acquisition activity in the future." Vlasov named Britain's Corus as a possible acquisition target for Severstal. Russian media reported earlier this month that billionaire Roman Abramovich is backing a plan to merge the Evraz company he holds a 41-percent stake in with Severstal and Metalloinvest, a steel and iron ore company controlled by Alisher Usmanov. Analysts quoted by Kommersant newspaper said a merger of Evraz with Severstal and Metalloinvest would create a company with 30 billion dollars capitalization.

Together with its holdings in Italian steel maker Lucchini, Severstal produced 16.7 million tons of raw steel in 2005 and had sales of 11.57 billion dollars.

Copyright Agence France-Presse, 2006

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