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. Last Updated: 07/27/2016

Uralkali Hires Foreign Banks for $1.1Bln IPO

YEKATERINBURG -- Uralkali, the world's fifth-largest potash producer, said Wednesday that it had hired investment banks Credit Suisse and UBS for a foreign initial public offering of its stock.

Uralkali said in a statement on its web site that its shareholders had voted on Aug. 1 to appoint the two banks as underwriters for the placement of 29 percent of its equity.

The IPO will be in the form of ordinary shares and global depositary receipts, and the underwriting agreement is to be governed by British law, the statement added.

The statement did not specify whether the listing would be in London.

Uralkali was not available to comment on either the details or the timing of the stock offering.

Uralkali's relatively small free float on the RTS stock exchange gives the company a market capitalization of $3.8 billion, which in theory values the stake to be sold at $1.1 billion.

That could make the IPO one of the country's largest, after the $10 billion IPO by oil firm Rosneft, services group Sistema's $1.6 billion London IPO last year and steelmaker Severstal's planned $1.5 billion offering.

But analysts cautioned that Uralkali, based in the Perm region, was a little-known company and would have to sell a compelling story to foreign investors to raise such a large sum of money.

"A strong market environment promotes all sorts of happy-sounding statements from companies that would like to tap capital markets," said Kim Iskyan, head of research at MDM Bank.

"I would have to ask whether there is an appetite for the market to pay $1 billion. There's not an infinite volume of funds that will flow into IPOs, so it's a question of timing and the right market environment."

Tatyana Kapustina, an analyst at brokerage Aton, said it would be logical for Uralkali to float in London.

She said prospects for the potash fertilizer industry were promising, but also cautioned that investor appetite might be insufficient to justify a $1 billion-plus IPO.

"I would expect a placement of $300 million, $400 million, $500 million -- that would be sufficient to buy out some smaller players in the industry," Kapustina said.

Uralkali's main owner, Dmitry Rybolovlyev, plans to sell shares he holds through a nominee company called Madura Holding. Rybolovlyev controls a stake of nearly 80 percent and would retain a majority after the IPO, media have reported.

Other investors in Uralkali include institutions such as the Third Millennium Russia Fund, DWS's Eastern Europe fund and Templeton Asset Management, according to Reuters company data.

Uralkali exports most of its production of potash fertilizers to Asia and Latin America, while selling less than 10 percent to Russia and the former Soviet Union.

It reported sales of 20.7 billion rubles ($774.4 million) in 2005, up 77 percent, while net profit rose 2.6 times, to 7.6 billion rubles.

The company produced 5.4 million tons of potash fertilizer last year and has said it wants to raise output to 5.7 million tons this year.