Beating the odds

22 January 2010 By Jason Bush

The Russian aluminium producer will debut at a premium valuation to its main Chinese rival. Investors were willing to overlook substantial legal, political and financial concerns. Perceived ties with China probably helped, as did the abundant liquidity in the Chinese market.

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According to sources in the IPO syndicate, RUSAL's shares have been priced at HK$10.8 ($1.39) per share. RUSAL had previously indicated a price range of HK$9.1 HK$12.5 per share ($1.17 to $1.55). A formal announcement is due on Jan. 22.

The pricing means that the IPO will raise $2.24 billion, implying a total market capitalization for RUSAL of $21.1 billion. RUSAL is selling 10.6 percent of its equity, with a primary listing in Hong Kong and a secondary listing in Paris, due to take place on Jan. 27.

In its 1,141page prospectus, RUSAL outlines "significant" risks, including unstable aluminium prices, large debt repayments, and a legal action against RUSAL's largest shareholder, Oleg Deripaska. The listing committee of the Hong Kong Stock Exchange has barred retail investors from buying shares in the IPO.

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