UPDATE 5-Russia's RUSAL raises $2.2 bln, others may follow

* Hong Kong IPO priced at mid-range HK$10.80 - sources

* Values company at 11.7 times EV/EBITDA, above peers

* Russian, Asian investors lend weight

* Risks remain on debt, aluminium pricing

* IPO’s success could attract more Russian companies

(Recasts with analyst quotes, details, background)

By Kennix Chim and Daisy Ku

HONG KONG/LONDON, Jan 22 (Reuters) - UC RUSAL raised $2.2 billion in a Hong Kong share float that will enable the world’s largest aluminium producer to repay some of its $14.9 billion debt and may spur other Russian firms to pursue Asian listings.

Asia’s richest man was among the investors to bet on RUSAL’s ability to flourish on growing Chinese demand for aluminium via a long-awaited IPO that will see RUSAL’s billionaire owner, Oleg Deripaska, surrender majority ownership of the company.

The IPO, also heavily backed by Russian state banks, priced in the middle of its range, three sources close to the offering told Reuters. This values RUSAL at a 15 percent premium to Hong Kong-traded peer, Aluminum Corp of China Ltd (Chalco) 2600.HK.

“That they were able to get this done at all is testament to the strength of the Russian treasury,” said Kim Iskyan, director at political risk consultant Eurasia Group.

“From the get-go, they pre-sold about 40 percent between the Russian government and friends of the Russian government.”

RUSAL, which will become the flagship Russian stock in Hong Kong when trading launches on Jan. 27, overcame heavy scrutiny to win approval from the bourse. Retail investors who usually swarm to Hong Kong listings were excluded as a precaution.

RUSAL spent much of last year in talks to secure Russia’s biggest ever debt restructuring deal and said in its 1,141-page IPO prospectus that future performance depends on the strength of aluminium prices, which have rebounded 80 percent this year.

The company sold 1.61 billion new shares, or just under 11 percent of its enlarged share capital, at HK$10.80 each, the sources said. The indicated price range was HK$9.10 to HK$12.50.

One source said a 15 percent drop in Chalco shares since Jan. 11 led some investors to hesitate when considering the price, which had earlier been guided toward the range’s top end.

The pricing values RUSAL at 11.7 times its expected 2010 earnings before interest, taxation, depreciation and amortisation. Chalco trades at a 10.2 times multiple and U.S. firm Alcoa Inc AA.N at 7.6 times, sources told Reuters.

The IPO attracted over 300 institutional investors, one source said. Heavyweight backers included Cheung Kong Holdings 0001.HK, the Hong Kong property group controlled by Asia's richest man, Li Ka-shing. Russian state bank VEB was among the cornerstone investors who agreed to a lock-up period of six months, and was joined by Nathaniel Rothschild's company, U.S. hedge fund Paulson & Co and Malaysian-Chinese businessman Robert Kuok Hock Nien.


Deripaska, 42, was the entrepreneur who emerged strongest from the aluminium wars that dominated the sector in the 1990s. A trained physicist with a talent for metals trading, he built a company that now supplies 12 percent of the world’s aluminium.

Before the financial crisis, Forbes magazine ranked him as the richest man in Russia. The IPO has cost Deripaska majority control of UC RUSAL: the stake held by his industrial holding, Basic Element, will drop to 47.59 percent from 53.35 percent.

But the backing of VEB, whose supervisory council is chaired by Prime Minister Vladimir Putin, reinforces Russian support.

VEB, along with state-run Sberbank SBER03.MM, removed a huge chunk of risk when they agreed on the eve of pricing to refinance a $4.5 billion debt that comes due this year.

Analysts expect a strong trading debut for RUSAL, under the symbol “486”, due to the large investor interest, although the recent stock-market sell-off in Hong Kong could weigh.

BNP Paribas BNPP.PA and Credit Suisse CSGN.VX are the joint sponsors and global coordinators of the IPO.

The Hong Kong Stock Exchange generated over $30 billion in IPO proceeds last year, more than any other bourse, and RUSAL’s listing could be the springboard for other Russian firms to tap into fervent demand from Asian investors. [ID:nLDE60E0WW]

A senior executive from Russian Railways said on Thursday the state-run rail monopoly would like to float shares there.

RUSAL’s attention will now turn to Paris, where it plans to list shares as Global Depositary Shares (GDS) at an offer price of $28.08, or 19.91 euros. Each GDS represents 20 ordinary shares.

The Paris listing, which is still awaiting approval of the French AMF regulator, would make RUSAL the first Russian firm to list in France since the early 1990s.

RUSAL forecasts full-year 2009 net profit of $434 million after higher aluminium prices and cost-cutting measures turned around a first-half loss of $868 million. For FACTBOX on RUSAL: [ID:nLDE60L1EN] For Breakingviews on RUSAL: [ID:nLDE60L0OP] (US$1=HK$7.75) (Additional reporting by John Bowker, Robin Paxton and Guy Faulconbridge in Moscow, Michael Flaherty in Hong Kong and Marcel Michelson in Paris, writing by Robin Paxton; Editing by Rupert Winchester)