Alrosa lures investors to sale
ALROSA has pledged to pay at least 35% of net income as dividends as the world’s largest diamond producer seeks investors in a share sale valuing it at as much as 280-billion roubles ($8.7bn).
Alrosa set the price range for its planned share sale at 35 roubles to 38 rubles apiece, with the final level to be announced on October 28, the diamond miner said yesterday. The Russian government and the eastern Republic of Sakha (Yakutia), where the monopoly’s main mines are located, are selling a combined 14% stake, while Alrosa will offer about 2% in treasury stock.
Russia is struggling to ramp up an asset sale programme aimed at balancing the budget and attracting investment to its financial markets, the cheapest among emerging market peers.
The finance ministry forecasts budget revenue from sales this year of about 52-billion roubles.
“The company will be able to sell shares within such a price range only if it has anchor investors,” Kirill Chuyko, head of equity research in BCS Financial Group, said.
“The price range is set high, while we expected the company to offer a discounted 32 to 33 roubles a share, as Alrosa has no track record and isn’t well known to investors yet.”
Alrosa rose 1% to 35.145 roubles in Moscow trading yesterday afternoon. Within the past month the shares have jumped as much as 19% to a near two-year high of 38.79 roubles on October 2.
Billionaire Suleiman Kerimov, who owned from 1% to 2% of Alrosa, sold his stake about a month before the share offer, Vedomosti newspaper reported yesterday.
To attract investors, Alrosa’s supervisory board pledged to distribute no less than 35% of net income in annual dividends starting from payments for this year. One near-term concern related to a higher dividend payout could be it signals that demand from investors for the offering is not as strong as initially thought, which could put pressure on the stock after the sale, George Buzhenitsa, a Deutsche Bank analyst, said yesterday.
In the long term, Alrosa may be an interesting investment, Mr Chuyko said, as gains in demand outstrip supplies of the gems.
Rough diamond prices will increase because supply is expected to expand at a compound annual rate of 2%, while demand is expected to grow 5.1% in the next 10 years, consulting firm Bain said.
“Alrosa’s decision is aimed at increasing the investment attrac- tiveness of the company,” Russian First Deputy Prime Minister Igor Shuvalov said of the dividend policy. Russia’s government would not sell additional stock in the company for at least 180 days after the share sale, he said.
Russia plans to maintain control of the Mirny-based Alrosa, which produces a quarter of the world’s diamonds by value and more rough diamonds than De Beers by carat.
State-controlled VTB Capital, acting as a stabilising manager in Alrosa’s shares sale, may purchase as much as 10% of the offered shares within 30 days of the announcement of the offer price, Alrosa said yesterday.
The sale will be the second major state asset offered this year. VTB Group, which owns VTB Capital, sold a $3.3bn stake in May, boosting its capital and diluting the state’s ownership of the company.