Mechel Considering $4Bln IPO on Frankfurt Exchange

Steelmaker Mechel is believed to be considering listing its mining division in Frankfurt in an initial public offering that could raise around $4 billion.

Mechel aims to sell a 20 percent stake in a newly created mining division that it values at $20 billion -- considerably more than the entire company's current value -- an official within an unidentified metals firm said, Kommersant reported Friday.

New York-listed Mechel, Russia's sixth-largest steelmaker, has a current market capitalization of $8.3 billion but has acquired extensive coal assets in the country's Far East.

Kommersant quoted the official as saying Mechel's billionaire owner, Igor Zyuzin, could announce details of the IPO within the next few days. In December, Zyuzin told reporters in Moscow about the planned listing, without giving details.

Mechel declined to comment Friday.

The company, tentatively called Mechel Mining, would include the Mechel's stakes in coal firms Yuzhny Kuzbass, Yakutugol and Elgaugol and might also include the Korshunov iron-ore mining and concentrating plant, Kommersant said.

In June, Mechel unveiled a $2.7 billion investment plan -- $1.5 billion for its steel plants and $1.2 billion for its mines -- to boost output over the next five years.

It has since spent 58.2 billion rubles ($2.36 billion) to win access to large coal deposits in the Sakha republic. These include the Elga deposit, potentially the country's largest coal field.

On Friday, Swiss bank USB advised investors to buy shares of Mechel and other Russian steel producers because they will be more profitable during periods of high coal prices.

The bank raised its recommendation on Mechel to "buy" from "neutral" and boosted its price estimate to $110 from $85 per Global Depositary Receipt.