Next year, diamond mining holding ALROSA plans to market 20-25% of its shares and raise $3 billion, gazeta.ru says. The company looks more than attracting to investors, experts admit. But it is unclear which of the shareholders will agree to dilute their basket of shares for the sake of additional issue of equities: the Russian Federation with a controlling stake or Yakutia with a blocking stake.
ALROSA intends to attract $3 billion in 2012 floating a 20-25-percent stake, the company’s CEO Fyodor Andreev said in an interview with Bloomberg Television. This would make ALROSA the world’s largest diamond company which has a listing, Andreev added. He pointed out that currently analysts estimate the company at $6 billion to $12 billion.
ALROSA announced its plans to go to stock exchange last year, immediately after the company’s shareholders approved its transformation into a public corporation from a closed joint-stock entity. At that time the debate was about placing a 20-percent package to the market, for which ALROSA intended to raise $1.5-2 billion. ALROSA’s management planned to prepare the company for an IPO by the end of 2011. Right now, the Russian Federal Property Management Agency (Rosimushchestvo, for short) owns 50.92% of shares in ALROSA, 32% belong to Yakutia and 8% to Yakut uluses (administrative districts in Yakutia). The remaining 9.07% are owned by individuals and legal entities, including 0.2% held by ALROSA’s subsidiaries. So far, the company’s transformation is not yet in force and its stock cannot be bought on the open market.
The company is studying the United States and Canada, as well as Russia and Hong Kong as possible locations for floating its stock, Andreev said. ALROSA will hold a tender to choose an IPO advisor, inviting such banks as Goldman Sachs, JPMorgan, Morgan Stanley and VTB.
ALROSA plans to use raised funds for investments (its investment program towards 2018 amounts to $7.5 billion). Some part of the money will go to refinance debt, which runs at $3.2 billion.
Experts have no doubts about demand for ALROSA’s equities. Diamond prices have already outpaced their pre-crisis levels by 8% and are on the uphill exceeding forecasts. The company's net profit under RAS for the past year amounted to 8.777 billion rubles. This is 3.7 times better than in 2009, 5.6 times better than in 2008 and 1.5 times better than forecasted.
ALROSA's revenue grew 1.5 times to 96.82 billion rubles, while its output reached 34.3 million carats. The company netted $3.483 billion in sales, and this year it intends to drive rough sales to $4 billion.
ALROSA commands the world's best diamond resources, says Sergey Goryainov, an expert of Rough&Polished, a diamond industry information agency. "In the near future, ALROSA may turn into a number one company, challenging De Beers, the world’s diamond industry leader. The latter’s market share has recently declined from 40% to 37-38% and the company is actively selling its mines to second-tier miners,” the expert says. “However, ALROSA, on the contrary, is fast to increase its share. Today, it controls about 30% of the market, but if it will keep the steam up it may well take 40%.”
"As for placement options, this is a question to be addressed to the shareholders," ALROSA’s spokesman Andrey Polyakov told gazeta.ru. In order to market a 25-percent stake, either the Russian government will have to dilute its stake in the company or the government of Yakutia will have to refuse from the blocking stake. "Right now it is very difficult to say how it will be solved. Everything will depend on the negotiations between the leadership of Yakutia and Russia,” Goryainov says.
In his view, it would be reasonable for the federal center to keep a controlling stake and for the government of Yakutia to preserve a blocking stake. Besides, the parliament of Yakutia earlier voted to retain a blocking stake. If it will be decided on an additional issue of stock, then most likely it will be held so that the shareholders retain the current ratio between their stakes, says Dmitry Baranov, a leading expert of Finam Management.
The company is interested to sell its securities not to a strategic investor, but to funds and financial companies, "in other words, to as many potential investors as possible," Andrey Lobazov, an analyst of IFC Metropol, adds. "It is not excluded that shares will be placed both in Russia and on one of the foreign stock exchanges. So it will be possible to attract a greater number of potential investors and raise more funds,” Baranov says.
"If there is a union of Toronto and London, it would be an ideal platform," Polyakov believes.
But a strategic investor is not excluded. Recently, Rio Tinto took a great interest in the Russian company. "There may emerge another strategic investor from among large mining companies like Rio Tinto, BHP or Anglo American,” Goryainov adds.
