Sovcomflot plans to raise at least $500 million in an initial public offering (IPO) on the Moscow Exchange, Russia’s top shipping company said on Tuesday, in a deal that could value it at roughly $10 billion according to sources.
The move by the state-controlled firm comes as Russian airline Aeroflot also plans to raise capital in a secondary public offering (SPO).
For Aeroflot, the cash is needed to fight the economic fallout from the COVID-19 pandemic.
Sovcomflot (SCF) which is raising money to spend on new projects and reduce debt aims to list in early October, two sources familiar with the plans told Reuters. Bankers said there was strong Russian interest, some of which could act as anchor investors.
The company provided no valuation guidance, but a banker involved in the deal pointed out its peers trade at 7-12 times their expected core earnings (EBITDA).
Sovcomflot posted EBITDA of $1.03 billion in the 12 months ended June 30.
Rivals include Scorpio Tankers, Frontline, Golar LNG Partners, Hoegh LNG Partners, Gaslog, Cosco Shipping Energy Transport and China Merchants Energy Shipping.
Another banker involved in the deal said a $7-10 billion valuation range sounded “reasonable” and the managers had sufficient feedback to go through with the deal.
Sovcomflot, which specializes in petroleum and LNG shipping, pointed to strong financials, including an adjusted EBITDA margin of over 70% for the first six months of 2020 and plans to pay at least 50% of its 2020 net profit as dividends, targeted at $225 million, in an effort to woo investors.
“SCF’s strategy remains focused on maintaining our ‘preferred carrier’ status with the major oil and gas companies by renewing and expanding our fleet, with a particular focus on the industrial projects that have historically provided long term predictable cash flows and profitable returns on invested capital,” CEO Igor Tonkovidov said in a statement.
Global IPO markets have livened up this month although Europe has lagged behind the United States where at least a dozen firms intend to go public in the next few days, the most since 2014.
The Russian stock market came under pressure in late August and early September amid concerns about potential fresh Western sanctions against Moscow following the alleged poisoning of Kremlin critic Alexei Navalny.
Bankers said markets were accustomed to “political noise” which was part of Russian country risk. One Russian fund manager, however, described the Navalny case as a potential “black swan” for the listing.
VTB Capital, Citigroup Global Markets Limited, Sberbank CIB, J.P. Morgan and BofA Securities are acting as joint global coordinators and joint bookrunners for the offering, Sovcomflot said.
The Russian government, which will remain Sovcomflot’s major shareholder after the IPO, has considered listing the company for years as part of its broader privatization plans.
Obstacles ranging from weak markets to international sanctions placed on Russia over its role in the Ukraine crisis previously prevented such a move.
(Additional reporting by Anton Kolodyazhnyy and Arno Schuetze; Writing by Alexander Marrow and Olzhas Auyezov; editing by Katya Golubkova, Mark Potter and Jason Neely)