After Arcelor bid, Severstal plans $1.5bn London float

MOSCOW: Russian steel group Severstal, in the limelight after its attempted merger with Arcelor, is now seeking to raise up to $1.5bn in a London share offer in October or November, banking sources said on Tuesday. Bankers close to the plan said Severstal has mandated Citibank, UBS and Deutsche Bank for the London float, which is expected to value it at $12-15bn, up from its current Russian market capitalisation of $11.7bn.

Severstal seeks to sell more than 10% of its stock in the flotation, bankers said. Severstal’s shares trade locally on Moscow’s MICEX stock exchange where its free float is around 5%, bankers said. Severstal spokespeople were not available for comments.

A London IPO worth $1.5bn would make it Russia’s third largest after state oil firm Rosneft’s $10.4-bn flotation in July and Sistema’s $1.6bn listing in February ’05. Bankers said Severstal would give investors a play on global steel industry consolidation after the $32-bn takeover of Arcelor by the metal’s biggest producer Mittal Steel.

Severstal’s rival proposal to merge with Arcelor was rejected by the shareholders of the Luxembourg-based European steel giant. Severstal is 89% owned by Alexei Mordashov, who according to Forbes magazine is Russia’s seventh-richest man, and in going to the London market the company follows Russian rivals Evraz Group and NLMK. The listing will give Severstal more liquidity and a larger war chest to pursue global mergers and takeovers, analysts said.

Severstal was pushing for an October-November timetable but there was uncertainty over whether it could produce first-half results in the time required by the LSE.