February 23, 2011
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Upcoming IPO in London Could be a Catalyst for TMK

Chelyabinsk Pipe, one of Russia’s largest pipe producers, has announced that the offer price range for its IPO on the LSE will be $3.5-4.6/share and GDR, implying a market cap (post issuance) of around $2.0-2.7 billion.

"The IPO price range offers a 5-38 percent premium to the current Chelyabinsk Pipe share price on MICEX. The book building commenced yesterday and the company plans to complete the placement on 9 February. The company is going to place 135 million (29 percent of current share capital) new and existing treasury shares (5.3 percent of share capital). In addition, the company’s core shareholders (reportedly, Andrey Komarov and Alexander Fedorov), plan to place 45 million existing shares in the IPO. As a result, the total size of the IPO may reach $630-828 million. ChelPipe intends to use the net proceeds from the IPO to reduce its debt", Chelyabinsk Pipe reported.

ChelPipe – Russia’s third-largest pipe producer. Chelyabinsk Pipe is the third-largest Russian pipe producer after TMK and OMK (Vyksa – VSMZ RU) and is the second-largest LD pipe player. ChelPipe’s investment case, in our view, provides strong exposure to the rising capex in Russia’s oil & gas sector through both the OCTG seamless and LD pipe segments. For 9M10, Chelyabinsk’s pipe production increased by 31 percent YoY to 1.1 mln tons, representing a 15 percent share of the domestic pipe market. For 9M10, IFRS revenues expanded by 41 percent YoY to $1.9 billion (RUB59.2 billion while EBITDA reached $438 million, reflecting an EBITDA margin of 22 percent (versus 16 percent for TMK in 2010E). At the end of 9M10, ChelPipe had a net debt of $2.7 billion, implying a 2010E net debt/EBITDA of 4.5 (versus 4.0 for TMK).

Copyright 2010, Chelyabinsk Pipe. All rights reserved.


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