Russian property developer PIK Group raised US$1.8 billion

Russian property developer PIK Group raised US$1.8 billion in an initial public offering, pricing the placement at the bottom of the range, becoming Russia’s top developer with a market value of US$12.3 billion.

PIK said the offering was Europe’s largest ever IPO by a real estate firm and the largest placement by a private sector company in the former Soviet Union.

The firm said on Friday it had priced its Moscow and London IPO at US$25 per share, at the bottom of its guidance of US$25-$31, signalling fading appetite for Russian developers and IPOs in general after a flurry of placements.

‘We believe that after this IPO, investors’ appetite for real estate investments may be nearly sated, making any further placements in the sector more challenging,’ said Rustam Botashev from Aton brokerage.

Kommersant business daily quoted banking sources as saying the offering was rescued at the last minute by two large Asian funds, which committed US$500 million each.

‘It was a tough placement,’ one source told Kommersant. PIK said four investors would each buy more than 5 per cent of the offering, together accounting for approximately 62.9 per cent of the offering.

PIK Group is one of the leaders of the booming property development market in Russia’s capital, which has a population of over 15 million. Deutsche Bank, Morgan Stanley, Nomura and Merrill Lynch organised the offering.

PIK’s and AFI’s IPOs dwarf previous placements by other Russian construction and real estate firms Open Investments and Sistema-Hals.

Shares in another Russia-focused real estate company AFI Development slid 20 per cent since it raised US$1.4 billion last month, becoming the country’s most valuable developer with a market capitalisation of US$7.3 billion.

PIK’s record IPO will also produce a reshuffle on the list of Russian richest people after it disclosed its major owners.

The firm said chief executive Kirill Pisarev and chairman Yury Zhukov will each hold 42.5 per cent in the firm post-IPO and prior to the over-allotment while 15 per cent will be freely traded.

It means the two men will be worth US$5.23 billion each putting them among the 25 richest people in Russia, compared to No 76 and 77 in the latest Russian rich list published by US Forbes magazine.

Source: The Business Times, 05 June 2007