9 Feb 2018 12:17

TMK's North American subsidiary IPSCO Tubulars postpones IPO due to adverse market conditions

MOSCOW. Feb 9 (Interfax) - IPSCO Tubulars Inc., the North American subsidiary of Russian pipe maker TMK , has postponed its proposed initial public share offering of due to adverse market conditions.

"While we received significant interest from potential investors, the continued market and economic volatility are not optimal conditions for an initial public offering," IPSCO said in a press release, quoting Piotr Galitzine, Chairman and CEO. "As a company, we've consistently made decisions in the best interests of our stockholders, employees and customers, and we will continue to do so," he said.

Shares in TMK plummeted on the back of this news by 4.3% from previous closing to a three-week low of 78.45 rubles a share by 10:13 a.m. on the Moscow Exchange in volume of 4.496 million rubles.

TMK said at the end of January that it could raise $316 million-$364 million with the IPSCO IPO. A total of 23.25 million rubles IPSCO shares could be sold in the IPO: TMK would offer 15.81 million and IPSCO another 7.44 million shares. The price range was $20-23 so the IPO might be worth $465 million-$535 million overall.

TMK currently owns 100% of IPSCO. The company said in its prospectus that TMK might be left with a 62% stake in the company or 58% including an option following the IPO.

The Houston-based IPSCO produces mainly OCTG products with capacity for 1.5 million tonnes of pipes annually. TMK estimates the subsidiary's sales revenue to US GAAP was $313 million-$332 million in Q4. Net profit for the period was $20.7 million-$29.2 million, adjusted EBITDA - $38.2 million-$46.3 million and the adjusted EBITDA margin - 12.2%-13.9%.

TMK is Russia's largest pipe producer and has plants in Russia, the United States, Romania, Kazakhstan and Oman, and two research centers in Russia and the U.S.

TMK's principal beneficiary is company chairman Dmitry Pumpyansky.

"The American stock market demonstrated record volatility at the start of the week, which led to a number of IPOs on the U.S. market being cancelled or postponed. IPSCO has not cancelled its equity offering, but has merely postponed it until such a time when the market stabilizes durably," TMK's Vice President for Strategy and Business Development Vladimir Shmatovich said. "The documents submitted to and agreed upon with the American regulator continue to be valid. Accordingly, we are limited in what we can say by the above," he said.

TMK's Pumpyansky told Interfax on Thursday that publication of the "Kremlin list" will not affect its North American subsidiary's IPO. "Of course it will have no impact," he said, responding when asked about the possible impact on IPSCO's share placement in New York. TMK's chief shareholder was included in the "Kremlin list" along with another 95 businessmen whose worth Forbes estimated at over $1 billion. This list, drawn up in accordance with sanction law requirement, is not itself a sanctions list and does not impose any restriction on those included, the U.S. Treasury said.

The decision on postponing the IPO is "moderately negative", said analysts at Aton, "as the placement could have helped in reducing leverage and opened the way to paying special dividends and revaluation of the group." "We understand the company's rationale - volatility has grown, and the intraday decline of the S&P and Nasdaq indexes has indeed been impressive, Aton said at the same time.

BCS analyst Oleg Petropavlovsky believes that the delay in the IPSCO IPO may lead to a 10% slide in TMK's value, as the offering was already factored into the company's share prices.