TMK float entrenches London's lead

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The Independent Online

London is set to consolidate its position as the destination of choice for foreign companies looking to raise money, with a string of Russian groups teeing up stock market flotations here.

TMK, the Russian oil services and pipeline giant, mandated the investment banks Credit Suisse, Dresdner Kleinwort and RenCap last week to lead a London listing planned for the end of the year.

TMK is to sell 15 per cent of its shares for between $500m (£266m) and $1bn, valuing the company at about $5bn.

The listing is at a preparatory stage and pre-marketing of the shares to institutional investors is not expected to begin until October or November.

SUAL, another Russian industrial group, has retained UBS and JP Morgan as bookrunners for a London flotation. That is expected to see the aluminium maker command a market valuation of $3bn.

Uralkali, a Russian fertiliser company with a market capitalisation of $3.8bn, has signed up Credit Suisse and UBS to underwrite a London sale of 616 million shares, or no more than 29 per cent of the company.

Two Russian steel groups want to list here too. Severstal has already retained advisers while MMK is in the process of choosing banks. Seversal, which failed in an attempt to merge with Luxembourg's Arcelor earlier this year, has hired Citigroup, Deutsche Bank and UBS to work on plans to sell more than 10 per cent of its shares later this year.

Alexei Mordashov, said to be Russia's seventh richest man, owns 89 per cent of Severstal. The $15bn listing is likely to make the steel group Russia's third largest company, behind the state-backed oil group Rosfneft, which completed a controversial $10.4bn flotation in London in July, and the consumer services company Sistema, also already listed in London.

It emerged yesterday that Pakistan's state Oil & Gas Development Company is also preparing to raise as much as $1.5bn on the LSE in a flotation towards the end of this year or the beginning of 2007 that could value the company at more than $10bn. Citigroup and Goldman Sachs will look to sell a stake of between 10 per cent and 15 per cent for between $1bn and $1.5bn.

The City has become a haven for foreign companies looking to raise money because of its concentration of expertise, cheaper listing costs and a wash of funds looking for a home.

Earlier this month, the London Stock Exchange revealed that 2006 had already become a record year for fundraising by flotations, surpassing in just seven months the total raised throughout the whole of 2005. International listings had played a "significant role" in this success, the LSE said. In July alone, the LSE attracted 25 flotations, raising a total of £7.4bn. Of the eight companies to list shares on the main market, three were international, raising between them the most in a month since the heady days of the boom of 2000. The 17 IPOs on the Alternative Investment Market, four of which were foreign companies, raised £563m in total.

London is outpacing New York as a destination for flotations as companies that may have in the past looked to Wall Street when raising funds continue to eschew tough, post-Enron corporate rules over there. The Sarbanes-Oxley legislation - rushed through in 2002 in the wake of a wave of US corporate scandals - stipulates onerous accounting standards aimed at ensuring that public companies more fully disclose their financial positions.

London attracted 50 international companies from 15 countries to the main market and AIM over the first six months of this year. Between them, they raised £4.5bn. In contrast, during the first five months of the year only 15 foreign companies listed on the NYSE and Nasdaq combined.