Bloomberg News

Polymetal Plans London Listing, $500 Million Sale of Shares

September 30, 2011

(Updates with CEO comments from third paragraph.)

Sept. 30 (Bloomberg) -- OAO Polymetal, Russia’s largest silver producer, plans a primary London listing in 2011 followed by a $500 million share sale as the country’s metals producers seek access to foreign investors and currency for acquisitions.

Under the plan, the company will be taken over by Jersey, Channel Islands-registered Polymetal International Plc in a share swap due to close Oct. 21, according to a statement today.

“Shares are expected to start unconditional trading on the London Stock Exchange in the first week of November,” Vitaly Nesis, chief executive officer of St. Petersburg-based Polymetal, said in a phone interview. The company may later gain entry to the benchmark FTSE 100 Index of stocks, Nesis said.

The company follows OAO Polyus Gold, a Russian producer of the precious metal, which moved its listing to London from Moscow in July. Evraz Group SA, the country’s largest steelmaker by output, said on Aug. 3 it was weighing similar plans. Polyus is using funds to expand as part of its goal of becoming one of the world’s five-biggest gold miners within five years.

“Being a premium listed company gives us a much more credible and versatile acquisition currency,” Nesis said. Polymetal will begin its London road-show on Oct. 3, meeting “with 15 of the top 20 institutional shareholders” to convince them of the need for the share swap, he said.

HSBC Holdings Plc, Morgan Stanley, Deutsche Bank AG, VTB Capital and Collins Stewart are managing the deal.

Main Holders

Five shareholders with a total 51.1 percent stake agreed to exchange their stakes, according to the statement. Management board members including Nesis will swap holdings of 0.8 percent.

The main investors on Dec. 31 were Petr Kellner, owner of PPF Group NV, with 19.58 percent, Alexander Nesis, brother of the CEO, with 18.9 percent, and Alexander Mamut with 10.73 percent. Treasury shares totaled 9.5 percent, according to a company report. Bobby Godsell, a former CEO of AngloGold Ashanti Ltd., will become independent non-executive chairman.

“For the time being we definitely intend to stick to the former Soviet Union for M&A activity and we are mostly looking for deals that are accretive bolt-on acquisitions,” Nesis said. Polymetal will focus on precious metals, mainly silver and gold.

The company will use proceeds from the $500 million sale of new shares after the swap to fund a mandatory offer to minority shareholders who decline to exchange their stock. Moscow-traded shares and London global depositary receipts will be delisted.

Dividend Payment

The producer may need to buy about 8 percent to 13 percent of outstanding shares for cash from minorities to complete the transaction, said Mikhail Stiskin, a Troika Dialog analyst.

Polymetal International plans to pay 20 percent of its net income as dividends, provided the ratio of net debt to adjusted earnings before taxes, interest, depreciation and amortization is no more than 1.75, it said. The company plans to pay 20 cents per Polymetal International share this year, it said.

Polymetal fell 4.8 percent to 505 rubles by 2:47 p.m. in Moscow trading after earlier rising as much as 3.7 percent.

--Editor: Tony Barrett, Alex Devine

To contact the reporters on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net; Firat Kayakiran in London at fkayakiran@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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