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. Last Updated: 07/27/2016

Wimm-Bill-Dann IPO Raises $207M

APIakobashvili, fourth from left, Yushvayev, right, and other Wimm-Bill-Dann officials joining NYSE president Robert Britz, fifth from left, to ring the opening bell on Friday.
Wimm-Bill-Dann made a strong debut Friday on the New York Stock Exchange, raising $207.1 million in a heavily oversubscribed initial public offering that saw 4 percent of the juice and dairy giant going to French rival Danone.

Wimm-Bill-Dann placed 10.6 million American Depositary Receipts, representing a stake of 25 percent plus one share, at an offer price of $19.50 each. The share, trading under the symbol WBD, closed at $22.60, giving the company a market capitalization of $960 million.

"We believe that our offering in many ways symbolizes a strong sign of recovery in the Russian economy," Wimm-Bill-Dann chairman David Iakobashvili said in a statement.

Wimm-Bill-Dann is the first Russian consumer goods company to float shares abroad and the fourth Russian firm to be listed on the NYSE. ING Barings led the IPO.

The company said net proceeds from the float, which was five times oversubscribed, amounted to $134 million and would be used for capital expenditures such as the purchase of dairy and juice equipment and additional plants.

In Paris, Danone announced Friday that it had paid $33 million for 16 percent of the offering, or 4 percent of Wimm-Bill-Dann.

"Danone intends to offer the EBRD a participation in this investment within the context of their partnership in Eastern Europe and Russia," Danone said in a statement.

Danone is required to give the EBRD the option of participating in its ventures in Russia under a 1995 partnership agreement worth $100 million.

However, a European Bank for Reconstruction and Development spokesman said Sunday that the bank had turned down Danone's offer. He refused to elaborate.

The lack of EBRD participation means Danone footed the $33 million purchase through its own resources.

A source close to Wimm-Bill-Dann expressed surprise that Danone had bought the stake and said the purchase suggested Danone would try to acquire more shares down the road.

"I think it shows that Danone is quite confident in the future of the company, hoping that they will be able to buy out more going forward, especially by buying into a market competitor," said the source, on condition of anonymity.

She acknowledged that the stake would give Danone a say in the life of the company but said it would not permit a seat on the board of directors.

A source familiar with the Danone purchase confirmed that Danone is looking to obtain a board seat, saying part of the reason was because it wants to keep an eye on Wimm-Bill-Dann and its well-over 30 percent share of the Russian dairy market. Danone, by comparison, has about 5 percent, the source said.

Another reason for the deal could be that Danone, which controls the Danone Volga dairy plant and Bolshevik confectionary factory, has decided it would be simpler and cheaper to expand in Russia by buying into a market leader, the source said.

The source added that Danone would need a stake of at least 11 percent to get on Wimm-Bill-Dann's nine-member board, an amount it could acquire through the NYSE or by teaming up with other minority shareholders.

Market players praised the float's success as a sign that investors have a renewed confidence in Russia. "The IPO was obviously very successful," said Peter Boone, head of research with the Moscow office of Brunswick UBS Warburg. "It was a large subscription and the valuations were pretty reasonable, so this is good news for the company and the market in general."

"I think this is a very good price and it would be too much to expect it to be higher, remembering all the negative publications and scandals that surrounded Wimm-Bill-Dann's IPO," said Andrei Galperin, head of the Prospect brokerage, which bought a 0.71 percent stake in the IPO.

Wimm-Bill-Dann, which had until last month kept its financial and ownership records a closely guarded secret, said in a prospectus filed ahead of the IPO that its main shareholder was Gavriil Yushvayev and that he had been convicted of a "violent crime" as a teen. It also acknowledged that its shareholders and directors were involved with the Trinity holding, which Russian media have linked to organized crime.

The company emphasized that Yushvayev was not a board member nor involved with its management.

With the IPO's success, more Russian food and beverage producers may search for investment abroad, Boone said. "I think this is good news for the brewery stocks, as they are generally cheaper than Wimm-Bill-Dann," he said.

Wimm-Bill-Dann controls 14 enterprises that produce 300 dairy products, 150 juices and juice drinks and canned vegetables. It had sales of $492 million in the first nine months of 2001, from $465 million in the whole of 2000.