November 27, 2012 / 7:56 AM / 5 years ago

MegaFon IPO book to close at 1400 GMT - sources

* Order book said to be oversubscribed

* Global fund cited as large buyer

* Seen pricing in lower half of range

MOSCOW, Nov 27 (Reuters) - The order book for the initial public offering (IPO) of MegaFon, Russia’s No.2 mobile phone firm, will close at 1400 GMT on Tuesday amid signs of solid investor demand, sources familiar with the offering said.

Sources on Monday said the deal was already oversubscribed and indicated the placement was likely to be priced in the lower half of the offer range.

Late orders could nudge up the final price, one source said on Tuesday.

MegaFon, controlled by Russia’s richest man, Alisher Usmanov, is selling global depositary receipts in London and Moscow at $20-$25, potentially raising $1.7 billion to $2.3 billion and valuing the firm at $11.2 billion to $14 billion.

The listing would establish MegaFon as an alternative to New York-listed Russia market players MTS and VimpelCom Ltd . It has been seeking to lure investors with a prospective dividend yield of 7-8 percent.

Questions about corporate governance, however, prompted investment bank Goldman Sachs to drop out of the deal, while the UK Listing Authority signed off on the prospectus only after Usmanov pledged to keep overall control under a deal to restructure his and his partners’ assets.

The bookbuilding process, in which MegaFon and its bankers pitched to investors in New York, London, Moscow and elsewhere to drum up orders, was also slowed down by the U.S. Thanksgiving holiday last week.

The deal received a boost after a large global investment fund placed an order for around $280 million worth of MegaFon stock, or more than a tenth of the issue, three sources said on Monday.

One source close to the deal called the quality of the order book “strong”, with interest from long-only investors greater than from hedge funds, and buying interest better than when state-controlled Sberbank, Russia’s top bank, recently sold $5 billion in stock.

“I see a reasonable after-market,” the source said, referring to likely demand for the shares following the IPO.

If syndicate banks exercise an over-allotment option, MegaFon would have a fairly small free float of 17 percent, making it a more natural target for long-term investors than short-term traders.

Nordic telecoms group Teliasonera is selling down its 35.6 percent stake to just over 25 percent. MegaFon itself is selling treasury stock it bought in an ownership shakeup last spring in which Usmanov secured majority control.

MegaFon is expected to finalise the placement on Tuesday night, with pricing, allocations and trading to begin on Wednesday.

Morgan Stanley and Sberbank are acting as joint coordinators, with Citigroup Inc, Credit Suisse and VTB as joint bookrunners.

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