Rosneft to raise as much as $11.6 bln in IPO

Deals

OAO Rosneft, Russia's state oil company, plans to raise as much as $11.6 billion in an initial public offering that would be the world's fourth-biggest, gaining funds to boost output as the government cuts its stake. The IPO will value the Moscow-based company at between $60 billion and $80 billion, Rosneft said today in an e-mailed statement. The government will receive as much as $8.5 billion and Rosneft will raise as much as $3.1 billion. The price range for the shares and global depositary receipts, which both go on sale today, is $5.85 to $7.85 apiece, Rosneft said. “We see great interest in the transaction and have already received requests for a substantial share of the offering, including from several large strategic players,'' Rosneft Chief Executive Officer Sergei Bogdanchikov said in the statement. The sale will test Russia's ability to lure investors after President Vladimir Putin built Rosneft into the country's third- biggest oil producer using assets seized from OAO Yukos Oil Co. The IPO comes after a seven-week slump in emerging-market stocks wiped 26% from the market value of OAO Lukoil, Rosneft's chief domestic rival. Lukoil's value is $59.8 billion. Rosneft doesn't expect any “significant damage'' from court cases resulting from Yukos's dismantlement, Bogdanchikov said today at presentations to investors in Moscow. The company can rely on government support and should receive “good dividends'' from its ventures with China, he said Rosneft and China's Sinopec last week agreed to buy a BP Plc affiliate that pumps 115,000 barrels a day of crude oil in Siberia.

G8 Meeting: The shares are due to begin trading by July 14, the day Putin meets U.S. President George W. Bush and one day before the Russian president hosts leaders of the Group of Eight nations in his hometown of St. Petersburg. ABN Amro Rothschild, Dresdner Kleinwort Wasserstein, JPMorgan Chase & Co., Morgan Stanley and OAO Sberbank are managing the IPO. Rosneft plans to set aside about 30% of the IPO for investors in Russia, including individuals, in what would be the country's largest ever stock offering. Sberbank will start today accepting orders of at least 15,000 rubles ($553) from Russians wanting to buy Rosneft shares, the company said June 23. The state will raise as much as $8.5 billion from the share sale to help pay down $7.5 billion in short-term debt and taxes, the company said in today's statement. Rosneft may offer as many as 400 million new shares, including a so-called over-allotment option, to raise as much as $3.1 billion.

Biggest IPOs: At $11.6 billion, Rosneft's IPO would exceed Bank of China Ltd. as the fourth-biggest, after NTT DoCoMo, Inc.'s $18.4 billion offering in 1998, Enel SpA's $17 billion IPO in 1999 and Deutsche Telekom AG's $13 billion IPO in 1996. Bank of China on June 7 increased the size of its May sale by 15% to $11.2 billion. Rosneft and state-controlled OAO Gazprom have given Putin control over 60% of the country's energy industry, the world's biggest. The IPO will proceed “on schedule,'' even with the market slump, Rosneft Chief Financial Officer Peter O'Brien said June 19. The Morgan Stanley Capital International Emerging Markets Index has slid 21% since May 8.

Concern About Litigation: Rosneft estimates daily crude oil output will reach as much as 2.8 million barrels in 2015. The company's oil and gas reserves stood at 18.9 billion barrels of oil equivalent on Dec. 31, based on standards used by the Society of Petroleum Engineers. Concern about possible lawsuits surrounding the Yugansk purchase may give some investors pause. The government confiscated the assets to help cover tax claims against Yukos. There are no serious litigation risks, Rosneft's O'Brien told investors on June 19 in Moscow. Yukos last week asked Britain's financial watchdog to block the IPO. Rosneft's first-quarter profit jumped 11% to $802 million, with revenue soaring 72% to $7.52 billion. (Bloomberg)

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