Lenta Shares Struggle to Maintain IPO Price on London Debut

Lenta Ltd., Russia’s second-biggest hypermarket chain, struggled to get above its initial public offering price in its Londontrading debut as concern over a weakening ruble and tensions inUkraine weighed on sentiment. The depositary receipts traded at $10.05 as of 9:50 a.m., compared with the $10 offer price, which was the bottom of a revised price range. The stock initially fell to $9.74. The IPO “was a success given very turbulent markets and investor concerns over the ruble rate and Ukraine,” said Natalya Kolupaeva, an analyst at ZAO Raiffeisenbank in Moscow. “Today’s movement isn’t very meaningful as this is conditional trading and market makers are supporting the stock.” The ruble tumbled to a record yesterday as Russia began military exercises amid deepening tensions in Ukraine. Lenta shareholders led by U.S. fund TPG Capital raised $952 million in the IPO, which valued the company at $4.3 billion. TPG Capital sold an 11.1 percent stake, the European Bank for Reconstruction and Development disposed of 4.8 percent, and VTB Capital sold 2.6 percent, Lenta said in a statement today. The offering size may increase to about $1.1 billion should banks exercise an over-allotment option, the company said. Lenta is one of at least three Russian retailers seeking to take advantage of a recovery in share sales, while London IPOs raised double the cash last year than they did in 2012. The Detsky Mir children’s goods chain is looking to list in London, and German retailer Metro AG’s Russian Cash & Carry unit plans to sell shares in the first half.

Market Conditions

The Metro unit will find it more difficult to sell shares, while Detsky Mir may struggle with its IPO in light of current market conditions, Raiffeisenbank’s Kolupaeva said. Lenta’s IPO was Russia’s largest since TCS Group Holding Plc (TCS) in October, which raised $1.09 billion. Since the IPO, TCS shares have fallen 37 percent. Lenta sold shares at an 11 percent discount to OAO Magnit, Russia’s largest retailer, and a 13 percent premium to smaller competitor O’Key Group SA (OKEY), based on estimated ratios of enterprise value to earnings before interest, tax, depreciation and amortization for this year, Kolupaeva said. JPMorgan Chase & Co., Credit Suisse Group AG, VTB Capital, Deutsche Bank AG, UBS AG and TPG Capital BD are managing the Lenta sale. The joint bookrunners were to be granted a 15 percent over-allotment option, according to Lenta. Source :   http://www.bloomberg.com/news/2014-02-28/tpg-backed-retailer-lenta-falls-in-london-after-952-million-ipo.html