Bloomberg News

GLG Delays Sibanthracite IPO as Investors Shun Mining Stocks (1)

July 12, 2013

A GLG Partners unit delayed an initial public offering of Russian coal miner Sibanthracite Plc, citing market weakness and a lack of interest in mining stocks.

The company had insufficient investor demand on the last day of the sale, said three people with knowledge of the process. GLG Emerging Markets Growth Fund may consider selling its stake in Sibanthracite off the market, one of the people said, asking not to be named as the details aren’t yet public.

The fund, a unit of the U.K.’s GLG, had attempted to sell a 25 percent stake in the supplier of high-grade anthracite coal at $7 to $9.50 per depositary receipt in London. Investors have recoiled from mining stocks as prices for coal and other commodities tumble amid weakening demand.

“The market isn’t favoring resource companies at the moment due to low commodities prices,” George Buzhenitsa, an analyst at Deutsche Bank AG in Moscow, said today by telephone. Buzhenitsa said he had still expected the deal to close because he saw GLG as “less price-sensitive.”

Entrepreneur Dmitry Bosov’s Alltech Group, which controls Sibanthracite, sold 25 percent of the coal producer to the GLG Partners fund in early 2008. The fund decided it would offload the stake after prices for steelmaking coal fell 55 percent since January 2012.

Investor Sentiment

“Market conditions and investor sentiment towards the global mining sector led to the decision to postpone,” the company said in a statement. That outweighed “significant interest and positive feedback,” it said.

Investor confidence in Russian stocks was also shaken by the July 8 announcement from OAO Pharmstandard, the country’s largest pharmaceutical company, that it was buying a Singapore-based company without disclosing why, two people said. Pharmstandard lost more than a third of its value this week.

Sibanthracite’s IPO would have been the first by a Russian company in the U.K. this year. Russian railroad-freight carrier NTS Holding Plc postponed a London IPO of as much as $500 million in January, citing a poor market.

JPMorgan Chase & Co. (JPM:US), Morgan Stanley (MS:US), Raiffeisen Bank International and Sberbank CIB managed Sibanthracite’s IPO.

“It’s very hard to sell shares of such a company when its product prices are expected to continue falling,” said Kirill Bagachenko, who manages about $3 billion in Russian equities at TKB BNP Paribas Investment Partners in St. Petersburg. “There’s a drop in demand and an oversupply in the mining and coal sectors.”

To contact the reporters on this story: Ruth David in London at rdavid9@bloomberg.net; Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editors responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net


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