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. Last Updated: 07/27/2016

PIK Raises $1.8Bln in Lowball IPO

VedomostiThe IPO means that shareholders CEO Kirill Pisarev, pictured, and chairman Yury Zhukov are each worth $4.85 billion.
Property developer PIK Group said Friday that it had raised $1.8 billion in an initial public offering, pricing the placement at the bottom of the range.

The IPO helps PIK to become the country's top developer with a market value of $11.4 billion.

PIK said the offering was Europe's largest-ever IPO by a real estate firm and the largest placement by a private sector company in the former Soviet Union.

The firm said Friday that it had priced its Moscow and London IPO at $25 per share, at the bottom of its guidance of $25 to $31, signaling a fading appetite for Russian developers and IPOs in general after a flurry of placements.

"We believe that after this IPO, investors' appetite for real estate investments may be nearly sated, making any further placements in the sector more challenging," said Rustam Botashev from Aton brokerage.

Kommersant quoted banking sources as saying the offering was rescued at the last minute by two large Asian funds, which committed $500 million each.

"It was a tough placement," one source told Kommersant newspaper.

PIK said four investors would each buy more than 5 percent of the offering, together accounting for approximately 62.9 percent of the offering.

PIK Group is one of the leaders of Moscow's booming property development market. Deutsche Bank, Morgan Stanley, Nomura and Merrill Lynch organized the offering.

Shares in another Russia-focused real estate company AFI Development slid 20 percent since it raised $1.4 billion last month, becoming the country's most valuable developer, with a market capitalization of $7.3 billion.

The PIK and AFI offerings dwarf previous placements by other Russian construction and real estate firms Open Investments and Sistema-Hals.

PIK's record IPO will also produce a reshuffle on the list of richest Russians after it disclosed its major owners.

The firm said CEO Kirill Pisarev and chairman Yury Zhukov would each hold 42.5 percent in the firm post-IPO and prior to the over-allotment, while 15 percent would be freely traded.

It means the two men will be worth $4.85 billion each, putting them among the 25 richest people in Russia, compared to No. 76 and No. 77 in the latest Russian rich list published by Forbes magazine.

The Russian real estate sector has boomed in recent years, offering returns of more than 100 percent a year, though there are signs that prices have begun to stagnate in the past few months.

Dozens of Russian firms have announced plans to list at home and abroad against a background of booming markets and an explosion in corporate finance, debt and equity deals.

Many analysts say Russian firms are rushing their IPOs to cash out before the presidential election in March 2008.

One of PIK's main focuses is production and assembly of concrete panel housing in Moscow as a subcontractor for the Moscow city government.

Mayor Yury Luzhkov is due to step down in December after 15 years in office.