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. Last Updated: 07/27/2016

TMK Shares Jump 17% After $1Bln Share Sale

Itar-TassTMK said the offering in London and Moscow valued the firm at $4.7 billion.
Shares in pipe maker TMK soared after its owner, Dmitry Pumpyansky, raised more than $1 billion in an initial public offering that was more than 19 times oversubscribed.

TMK, which produces 7 percent of the world's seamless steel pipes and makes tubes for oil rigs and pipelines, said Tuesday its shares would be listed in Moscow at $5.40 each with global depositary receipts in London at $21.60, the upper limit of the indicated range.

TMK shares jumped 17 percent to $25.10 in their debut trading in London.

"It has the scale to be considered a global company," said Tim McCutcheon, a partner at Moscow corporate finance boutique DBM Capital.

"You automatically have a play that is beyond Russia in terms of size, but you also have the Russian angle to the story -- increasing pipeline and household construction, and GDP growth in Russia contributing to a natural source of demand."

TMK, the world's second-largest supplier of pipes to the oil and gas industry, said the IPO valued the company at $4.7 billion.

"We are delighted with the strong levels of interest and participation in the offering from a broad range of investors," said Pumpyansky, who was ranked the country's 35th-richest man by Forbes magazine in May.

TMK Steel, the holding company through which Pumpyansky controls a majority in TMK, will use the funds raised to repay a loan with which the owner bought out minority shareholders. Sergei Popov and Andrei Melnichenko, the owners of MDM Bank, had earlier agreed to sell their stakes in TMK to Pumpyansky.

TMK, which last year sold one-fifth of its output to gas monopoly Gazprom, plans also to increase capacity by more than 50 percent by 2010, including of steel billet -- the raw material for its seamless pipes -- to 3 million tons, company officials have said.

TMK's earnings before interest, tax, amortization and depreciation were $393 million and revenues totaled $1.58 billion for January through June of this year.

Credit Suisse, Dresdner Kleinwort Wasserstein and Renaissance Capital were joint global coordinators.

TMK said the selling shareholder, TMK Steel, had offered 180 million shares plus an over-allotment option of 18 million shares and a further 2.65 million shares to employees. Together, this equals about 23 percent of TMK's issued share capital.

TMK declined to comment on capital expenditure plans. A source close to the company said it had invested more than $300 million this year and would roll 3 percent to 4 percent more pipes in 2006 than the 2.9 million tons it sold last year.

The company controls the Volzhsky, Sinarsky and Seversky pipe plants and Taganrog Steel Plant, all in Russia. It also owns the Romanian companies Artrom and Combinatul Siderurgic Resita.

McCutcheon of DBM said investors would be watching to see whether TMK -- whose customers in over 65 countries include Shell and Saudi Arabia's Aramco -- could preserve stable margins in times of higher steel or lower oil prices.

"The problem with pipe producers is: If your main customers are oil giants and your main suppliers are steel giants, you're stuck in the middle. It's hard to have any pricing power," he said.

"But TMK is a pretty big company, which allows them a little more room for maneuver in terms of pricing power."