Rusal Said to Sell Shares 16% Cheaper Than Chalco

Jan. 4 (Bloomberg) -- United Co. Rusal Ltd.’s Hong Kong initial public offering may value the world’s largest aluminum producer 16 percent cheaper than its biggest Chinese competitor. The HK$9.10-to-HK$12.50 a share price range announced last week would give the Moscow-based company controlled by billionaire Oleg Deripaska an enterprise value of between 10.6 times and 13.3 times its 2010 pretax profit, said two people familiar with the information. Rusal may become the first Russian company to go public in Hong Kong after the city’s benchmark Hang Seng Index gained 52 percent last year. The metal producer, restricted from selling stock to retail investors, plans to raise as much as HK$20.1 billion ($2.6 billion) to pare debt of $14.9 billion. “Projections are always difficult,” said Francis Lun, a Hong Kong-based general manager at Fulbright Securities Ltd. “Performance of the shares is what really matters. Since they have no retail investors, I think they will be able to maintain the listing price.” Banks helping to arrange the IPO estimated Rusal will generate earnings before interest, tax, depreciation and amortization of $2.2 billion this year, said the people who declined to be identified as the information is private. Enterprise Value The enterprise value, or a company’s stock and debt minus cash, to EBITDA ratio for Aluminum Corp. of China Ltd., the country’s largest producer of the metal, is almost 15.9 times, according to data compiled by Bloomberg. Alcoa Inc., the largest U.S. aluminum producer, trades at 9.3 times, while Rio Tinto Group, the world’s second-largest aluminum producer, is valued at 10.2 times. Christine Chan, a Hong Kong-based spokeswoman for BNP Paribas SA, and Adam Harper, a Credit Suisse Group AG spokesman in the city, declined to comment. BNP and Credit Suisse are leading others including Bank of America Merrill Lynch, BOC International Holdings Ltd., Nomura Holdings Inc., Renaissance Capital Ltd., OAO Sberbank and VTB Capital SA, to arrange the sale. Rusal posted a net loss of $868 million in the first half of 2009, compared with a net income of $1.4 billion a year earlier. Profit won’t be less than $434 million for 2009, it said in its prospectus. Expand IPO The metal producer is selling 1.61 billion new shares, or a 10.6 percent stake, it said in filings to the Hong Kong stock exchange last week. Rusal may expand its IPO by another 225 million shares to meet additional demand, according to an e-mail sent to institutions today. Vnesheconombank, the Russian state development bank also known as VEB; NR Investments Ltd., the principal investment company of billionaire Nathaniel Rothschild; New York hedge-fund manager Paulson & Co., and Malaysian billionaire Robert Kuok and companies controlled by him have agreed to buy HK$6.86 billion worth of shares in the IPO. Rusal’s debt almost doubled after buying a quarter of OAO GMK Norilsk Nickel before commodity prices collapsed. The company doesn’t expect to pay dividends through 2013, it had said in the prospectus. To contact the reporters on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net; To contact the reporter on this story: Kyunghee Park in Hong Kong at kpark3@bloomberg.net