MegaFon may float 20% stake to raise $4 billion

MegaFon, Russia’s No.2 mobile phone firm, may float a stake of up to 20 per cent, worth $4 billion, on the London Stock Exchange in the second half of 2012, banking and industry sources said. The initial public offering, which would be the biggest in London since commodities trader Glencore floated last May, would depend on agreeing a buyback of billionaire Mikhail Fridman’s 25.1 per cent stake in MegaFon for around $5 billion. The sale of the stake could position MegaFon for the roll-out of next-generation 4G mobile services such as mobile broadband and pay-TV. It would also let Fridman to cash out without having to share the high costs needed for expansion. Three sources familiar with the matter said the IPO would seek to value MegaFon at $20 billion, a slight premium to its listed peers MTS and Vimpelcom. Another banker said MegaFon was looking to hire banks for the IPO, which is likely to be held in London. MegaFon this week took out a $2 billion bridging loan from three Western banks in a sign a deal was close. Local media said it was talking to Russian banks to raise further funds. The company has net cash of around $1.5 billion. One banker familiar with the matter said the loan deal made it “definitely difficult to deny” that MegaFon’s three owners -Alisher Usmanov, Nordic telecoms group TeliaSonera and Fridman -were close to agreement. Usmanov, Russia’s richest man with a fortune estimated by Forbes magazine at $18.1 billion, currently owns 31.1 per cent of MegaFon. TeliaSonera has a stake of 43.8 per cent. Sources say that Fridman’s shares would likely be canceled once they are bought back by MegaFon, while TeliaSonera would be expected to sell down its stake in the IPO to ensure that the company remains under Russian control. “TeliaSonera would never be able to obtain control,” the banking source said. TeliaSonera CEO Lars Nyberg, asked about MegaFon at a results news conference on Thursday, declined to comment beyond reiterating an earlier statement that talks on the company’s ownership structure and governance were continuing. Representatives for MegaFon, Usmanov and Fridman all declined comment.