More Companies Preparing For IPOs

KIEV, Ukraine -- A growing number of Ukrainian companies are planning to raise badly needed capital to fuel sustained growth by listing their stock on exchanges in Europe.

Frankfurt DAX Stock Exchange

A handful of companies have floated their stock abroad through initial public offerings, or IPOs.

About 20 small to medium-sized Ukrainian firms have raised cash by floating their shares abroad as depository receipts since the Orange Revolution slapped Ukraine onto the radar screens of investors two years ago.

Last month, several Ukrainian companies announced they were considering a stock floatation on Germany’s Frankfurt Stock Exchange through an IPO.

These include oil and petrol trader Galnaftogaz, chemical and textile producer Chernihiv Khimvolokno, TMM Real Estate, and dairy group Milkiland.

Myronivsky Khlibproduct, a Ukrainian agriculture and food holding, announced last week that it planned to tap into Western capital markets through an IPO next year.

Yuriy Kosyuk, the company’s chairman of the board, said Myronivsky Khlibproduct would place around 20 percent of its shares on the main section of the London Stock Exchange next spring.

Some industry experts estimate the 20-percent stake at $150 million. Myronivsky Khlibproduct, best known for its Nasha Riaba poultry brand, was given a global rating of B2/Stable by Moody’s Investors service.

The company is listed as being almost 99 percent owned by Kosyuk.

Another major Ukrainian company looking for investment abroad is the Lutsk Automobile Plan (LUAZ), which assembles automobiles and buses.

LUAZ, a part of the Bohdan Corporation, which is controlled by pro-presidential parliamentarian Petro Poroshenko, plans to hold an IPO in 2009-10.

Earlier this year Bohdan President Oleg Svinarchuk said the company would offer a 10-20 percent stake to foreign investors.

The fourth biggest automobile producer in Ukraine, LUAZ reported an income of over $200 million last year.

Serhiy Oleksiyenko, vice-president of the Kyiv-based investment fund Renaissance Capital, said Ukrainian companies increasingly see foreign stock markets as the best places to satiate their growing investment appetites.

“They need an access to significant financial resources, which are lacking in Ukraine,” said Oleksiyenko.

According to him, neither Ukrainian banks, nor the country’s stock market can meet the investment needs of rapidly growing domestic companies.

“If a company wants to attract around $100 million or more, it can do so only through an IPO on a foreign stock market or a bank loan,” he added.

Still, only large industrial holdings are able to get huge loans from big foreign banks, unlike middle-sized companies, according to Oleksiyenko.

“An IPO is an alternative for midsized companies to obtain financial assets,” said Oleksiyenko.

Earlier this year, one of Ukraine’s wealthiest tycoons, Viktor Pinchuk, announced plans to do an IPO abroad for the country’s largest pipe producer, Interpipe, in 2008-2009.

Donetsk billionaire Rinat Akhmetov’s holding company, System Capital Management, has also bridged the subject publicly.

However company representatives say no firm decision has been made yet.

The planned placements follow a small flurry of activity over the last two years.

In 2005, several companies conducted IPOs on London’s Alternative Investment Market.

Ukrproduct, a milk producer, fetched more than $9 million; Hydrocarbon exploration & production company Cardinal Resources took in $20 million; and real estate firm XXI Century raised $140 million.

One of the biggest Ukrainian sugar producers, Astarta-Kyiv, attracted $30 million, placing a 20-percent stake on the Warsaw stock market.

Serhiy Oleksiyenko said foreign investors are showing more interest in Ukrainian companies than ever, but most are still hesitant to enter the country’s stock exchanges, because it doesn’t guarantee “fair rules of the game.”

“Ukrainian stock exchanges don’t demand full disclosure from listed companies as foreign ones do, providing investors with confidence,” he added.

Source: Kyiv Post


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