Russia's Polyus Gold Prepares to Sell 3.5% Stake for $400M

Russia’s equity market is slowly coming back to life.

Russia's Polyus Gold is one of the biggest gold producers in the world. bne IntelliNews

Russia's largest gold producer Polyus Gold sold a 3.84 percent stake in an accelerated book-building for a secondary public offering (SPO) on the Moscow Exchange, raising $390 million, the company said in a statement on Thursday.

Russia’s equity market is slowly coming back to life. Since the beginning of 2019 there have been a number of equity deals carried out on the Russian stock market, after a desert of no deals since August 2018.

“[The company] has successfully sold approximately 5.13 million ordinary shares in the form of global depositary shares (GDSs) and ordinary shares of the company,” the statement said. “The sale, carried out by way of an accelerated bookbuild, was priced at $38 per GDS corresponding to a price of $76 per ordinary share, with two GDSs representing an interest in one ordinary share.”

Other recent deals included sales of equity in Norilsk Nickel and Evraz by oligarch Roman Abramovich and Alexander Abramov, the sale of a minority stake in the TCS banking Group — which owns Russia’s only fully online bank Tinkoff bank — by its owner Oleg Tinkov, preparation of an SPO by meat major Cherkizovo, and a possible IPO of Russian rail operator RusTransCom that was announced last week.

Risk on

Polyus Gold shares have ridden the wave of rising demand from investors that are back in “risk on” mode. The SPO sold a stake that was part of the 82.44 percent portfolio held by the holding company Polyus Gold International, controlled by Said Kerimov, the son of billionaire and senator Suleiman Kerimov.

The deal increases the company’s free float from 16.67 percent to 20.51 percent. The majority owners retain a stake of 78.6 percent. The company will not receive the proceeds from the sale, Polyus said.

Goldman Sachs International, Bank GPB International S.A., J.P. Morgan Securities plc, Sberbank CIB (UK) Limited and VTB Capital plc acted as joint global coordinators and bookrunners for the placing. The majority shareholders have agreed to a 60 days lock-up with regard to any new GDR sales.

After nearly five years of being moribund, investors are becoming increasingly interested in Russian equities as while the overall index has remained flat, the crises and sanctions have catalysed a consolidation in many sectors and individual corporates have flourished as they increase their market share. At the same time Russian companies are paying the highest dividend yields in the world – at least twice the level of the average dividend yield paid by companies included in the benchmark MSCI EM index.

Reportedly, the Russian Fund for Direct Investment (RDFI) along with a number of Middle Eastern Funds will participate in the offering. Analysts and investment bankers surveyed by Vedomosti daily believe that prolonged indecision over sanctions and growing gold prices will support Polyus shares. Since October 2018 the company’s shares have gained 30%.

Polyus Gold has been showing stable financial results in the third and fourth quarters of 2018 and is investing in developing two massive gold deposits in Sukhoi Log and Natalka, making it one of the biggest gold producers in the world.

This article first appeared in bne IntelliNews.

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