SPLIT-UP OF RUSSNEFT SHARES

   RussNeft will split up the ordinary shares reducing the nominal of one share form 1000 rubles to 50 kopeks, according to the company. Consequently, the number of the ordinary shares of RussNeft will increase from 147,059 to 294.1 million. With that, the total nominal value of the shares will not change. This is to attract individuals to the IPO, the company’s insider communicated to Vedomosti. But it is unknown whether this will be a wide popular IPO, as previously done by VTB and Rosneft.

RussNeft intends to place up to 10% of the shares at the Moscow Exchange for $400 - $500 million, Mikhail Gutseriev, the co-holder and president of the company said in Summer. Should the market support that estimate, the oil assets of Gutseriev family will start to consolidate based on RussNeft, the businessman promised. Besides RussNeft, the Gutserievs own Neftisa, Forte Invest and Global Energy.

According to a person close to the company, the evaluation of $400 - $500 million is actual. The funds obtained from the placement will be used to redeem RussNeft’s debts, Gutseriev explained. On the eve of the IPO, RussNeft management “put the company in order”, in particular, reduced the debt down to $1.3 billion (VTB is the only bank creditor of RussNeft now) due to attraction of loans from Gutseriev’s structures and conversion of the debt to Glencore into shares.

The current issue is to sell 15% of the shares at the Moscow Exchange but this is not final decision, according to one of the placement agent banks. Such appointed banks include VTB Capital, Sberbank, Bank Otkrytie. The company intends to hold the road-show within near future, the placement will take place in November, as Vedomosti was informed. According to Gutseriev, the company wanted to approach exactly financial investors to the IPO.

RussNeft splits up its shares for a clear reason: if it does not do this, it will have to sell one share for $21,100 – $27,700, as calculated by Vasily Tanurkov, ACRA analyst. Based on the declared evaluation, the value of one share after split-up will be $10.6 - $13.85. It is unlikely that RussNeft plans to hold a wide scale popular IPO, it would be a risky activity in the current situation, Tanurkov believes. All remember, when VTB had to buy out its shares from individuals for the placement price, the expert points out. By splitting the shares, RussNeft will make them affordable for private investors and ensure their liquidity, Vitaly Kryukov, Director of Small Letters, agrees. This will be convenient both for minor investors and for major investment foundations, he adds.

According to two investment foundations, there has not been any invitation from RussNeft to participate in the IPO. Both organizations are skeptical as for buying shares: RussNeft is a too closed company, one of them explains.