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The Sunday Times: £15bn float for Russian metal giant

EXTRACT: The business relationship with Russia has also soured, mainly because of what UK companies believe is the unfair expropriation of oil and gas assets. Shell was this year pushed into the sale of a stake in its Sakhalin 2 gas project to Gazprom, the state-controlled gas group. Now TNK-BP is under similar pressure.

June 3, 2007
Dominic O’Connell

THE Russian aluminium giant Rusal will kickstart the biggest float of the year in London this week when it opens a roadshow for top investors ahead of a listing expected to value it at about $30 billion (£15 billion).

The company’s top management – led by chairman Victor Vekselberg and chief executive Alexander Bulygin – will tell institutions it plans a full listing on the main London market this autumn, meaning the firm will qualify for the elite FTSE 100 group of British companies. Its expected stock-market value will put it at about No 30 in the index, alongside such household names as Imperial Tobacco and Cadbury Schweppes.

Rusal will have to put at least 25% of its equity on to the market to comply with listing requirements, ensuring the float will raise a minimum of $7.5 billion.

Vekselberg is rated No 61 in the Forbes list of global billionaires with a fortune estimated at $10.4 billion. Barring any last-minute changes, he will become the first oligarch to chair a FTSE 100 group.

He made his fortune by building up the aluminium group Sual, which merged with Rusal this year, and is a board member of TNK-BP, BP’s Russian joint venture. He hit the headlines three years ago when he bought the Forbes family’s collection of Fab-ergé eggs for the Russian nation.

The aluminium group has already recruited two heavyweight nonexecutives – Nigel Kenny, former finance director of Standard Chartered, and Philip Lader, former US ambassador to Britain and chairman of WPP – and will hire more.

Rusal’s charm offensive comes against a backdrop of worsening Anglo-Russian relations, caused by the controversy over the poisoning of Alexander Litvinenko. The business relationship with Russia has also soured, mainly because of what UK companies believe is the unfair expropriation of oil and gas assets. Shell was this year pushed into the sale of a stake in its Sakhalin 2 gas project to Gazprom, the state-controlled gas group. Now TNK-BP is under similar pressure.

The political and business storms do not appear to have dented Russian firms’ appetite for the large pools of international capital available in London. But most have kept their main listing in Russia, with London investors able to buy only global depositary receipts – a secondary form of security.

Rusal will seek a full market listing, which demands greater transparency and full compliance with London listing requirements.

The company is advised by Credit Suisse and JP Morgan Cazenove, but no bank has yet been chosen to handle the float. City sources said there was “jostling” for the job between top City institutions.

Rusal – or United Company Rusal, to give its full title – is the world’s largest producer of aluminium. It was formed in March by the combination of Russia’s Rusal and Sual and a clutch of assets contributed by Glencore, the Swiss trading group. Shareholders in Rusal – led by Oleg Deripaska – own 66% of the group, Sual 22% and Glencore 12%.

“UC Rusal has always made clear that it will undertake a main market IPO within three years of its creation,” the company said. “Following the completion of the merger, we have scheduled a range of meetings with the financial community, However, no final decisions have been taken nor any timetable agreed in relation to an IPO.”

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1874595.ece

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