Gazprom Offering $2.3 Billion Stake on Market to Raise Cash

Gazprom Offering $2.3 Billion Stake on Market to Raise Cash

Bloomberg  | Jul 25, 2019 09:45

Gazprom Offering $2.3 Billion Stake on Market to Raise Cash

(Bloomberg) -- Units of Gazprom (MCX:GAZP) PJSC plan to sell a stake of about 2.9% in the Russian natural gas producer Thursday after CEO Alexey Miller said he was looking to raise cash from quasi-treasury shares.

Gerosgaz Holdings BV and Rosingaz Ltd., which are both 100%-owned subsidiaries, will offer 693.6 million common shares in Gazprom (MCX:GAZP) on the Moscow Exchange, the company said in a regulatory filing. The terms of the deal don’t allow a partial sale of the shares being offered.

At Wednesday’s closing price of 212 rubles per share, the stake is worth 147 billion rubles, or $2.3 billion. Gazprom has 23.67 billion shares outstanding, according to data compiled by Bloomberg.

In June, Miller told reporters that the company was looking for “different market ways to monetize” its portfolio of quasi-treasury shares, which are owned by Gazprom’s units. That type of stock makes up about 6.64% of Gazprom’s total 23.67 billion shares outstanding.

“The reason, of course, is that today Gazprom is the leader of the Russian stock market,” Miller said, explaining why the future of quasi-treasury shares is more important today than in previous years. “Of course, the efficiency of managing its own capital is one of the key issues for company’s executives.”

Russia’s biggest natural gas producer has been surprising investors this year by boosting its dividend to a record level and pledging to base future payouts on a transparent formula based on financial results. Miller has also undertaken several waves of management changes aimed at improving openness.

The Gazprom units hired Gazprombank to arrange the offering, collecting bids until 5 p.m. Moscow time. The results will be announced following a book-building process.

Gazprom (MCX:GAZP) shares have advanced 65% in the past year, outpacing an 19% gain in the MOEX Russia Index, according to data compiled by Bloomberg. Its shares erased morning losses after the announcement, and rose 7.6% to 228.15 as of 1:28 p.m in Moscow.

“In the past few days, Gazprom shares performed worse than the market,” said Alexander Orekhov, head of Russian equities trading at Renaissance Capital. “It’s hard to evaluate” if Gazprom’s sale will be at a discount but typically there’s a 3% to 7% one for a $300 million to $400 million placement, he said. The size of the offer means there could even be an anchor investor, according to Orekhov.

VTB Capital estimates that the shares will be publicly traded after the sale, potentially increasing the company’s weighting on the FTSE index and the MSCI index.

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