Rusal Gets Backing For $2B IPO Offering

Russian aluminum giant UC Rusal won backing for its US$2 billion Hong Kong initial public offering from Asia-based tycoon Robert Kuok and two prominent hedge funds, two people familiar with the matter said Tuesday.
The backing could lend credibility to an IPO that got off to a rocky start, after Hong Kong regulators forbade retail investors to participate amid concerns over Rusal's $14.9 billion in debt.
According to the people familiar with the matter, the investors include Mr. Kuok, also known by Chinese name Kuok Hock Nien, whose Kuok Group includes Hong Kong-listed Kerry Properties Ltd. and English-language daily South China Morning Post; blue-blood hedge fund manager Nathaniel Rothschild, through his NR Investments; Paulson & Co., the hedge fund run by John Paulson; and Russian state development bank Vneshekonombank, or VEB.
The four will serve as cornerstone investors, these people said. Cornerstone investors buy into a company during the pre-IPO stage and agree to hold their stakes for a certain period of time, in this case six months.
Rusal plans to raise about US$2 billion from selling around a 10% stake as part of efforts to repay debt. The company is set for a primary listing in Hong Kong and a secondary listing of its depositary receipts on Paris' Euronext stock exchange on Jan. 29.
The deal is being closely watched in investment banking circles. It marks Hong Kong's first Russian IPO as it seeks listings from there and elsewhere in the world to diversify beyond its heavy China focus.
It has also posed unusual regulatory issues that put the offering under a cloud. The Hong Kong securities watchdog, the Securities & Futures Commission, approved the IPO under the condition that it not be marketed to small investors. The Hong Kong stock exchange's listing committee delayed approval of the offering as it sought more information, including details of its debt restructuring.
Analysts value the entire company at US$20 billion to US$26.7 billion. In a recent report, resource-focused investment bank Liberum Capital said its $20 billion to $26 billion valuation range implies a price-earnings multiple range of 14.1 times to 18.3 times 2010 earnings. By comparison, it said, Western peers fetch an average of 24.7 times 2010 earnings, while Hong Kong-listed Aluminum Corp. of China Ltd. fetches a 24.7 multiple.
Rusal is the world's largest aluminum and alumina producer with an output last year of 4.4 million metric tons of aluminum, or 12% of the global total, and 11.3 million tons of alumina, or 13% of world production, according to metals and mining consulting firm CRU Strategies.
Rusal earlier this month completed the restructuring of US$7.4 billion in debt with more than 70 Russian and global banks. VEB provided Rusal with a $4.5 billion bailout loan in 2008 and has said it plans to buy up to 3% of the IPO.
Pre-marketing of the deal will begin Jan. 4, said one person familiar with the matter. The roadshow, which will begin in Hong Kong before proceeding to Singapore, the U.K., continental Europe and the U.S., will start on Jan. 12.
People familiar with the situation said earlier that financial investors that have shown interest included Los Angeles-based Capital Group Cos. and asset management firm BlackRock Inc.
Bank of China International, BNP Paribas SA, Bank of America Merrill Lynch and Credit Suisse Group are bookrunners on the deal.