Central Asia: Kazakhstan turns abroad for advice on IPOs
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Halyk Finance to act on sale of electricity grid; State seeks more international banks for deals
Kazakhstans programme of what are called Peoples IPOs proceeds apace, with international bank advisers now being sought for individual deals. Advice from international banks has been deemed necessary because the sales are unprecedented in Kazakhstan.
Although later offerings might be open to foreigners, initial stakes of between 5% and 15% in state-owned companies are being sold on the Kazakhstan Stock Exchange to domestic investors only. Banks are therefore not being selected yet on the basis of their ability to distribute internationally.
"International banks are being sought to advise on individual IPOs to make sure the Peoples IPOs reach international standards from the very beginning"
"International banks will lend their expertise in areas such as valuation, due diligence and ensuring international best practices," says Marcia Favale-Tarter, an adviser to the prime minister Karim Massimov. State holding company Samruk-Kazyna appointed UBS and Citi to advise on the overall programme in May, alongside local firms Visor Capital and KazKom Securities.
Halyk Finance, a unit of local bank Halyk, was appointed in August to advise on the specific IPO of Kegoc, the national grid company, according to a separate source involved in the programme. Samruk-Kazyna is now looking for an international bank adviser for Kegocs IPO.
State oil-transport company KazTransOil sent out a request for proposal to potential advisers on its proposed IPO in August. However, says the source, teething troubles have meant an adviser has not yet been appointed.
"International banks are being sought to advise on individual IPOs to make sure the Peoples IPOs reach international standards from the very beginning," says Favale-Tarter, a former banker. She also advised on the restructuring of the Kazakh banking sector after the financial crisis.
The grid and oil-transport firms, alongside Astana Airways, are to be the first state firms to participate in the Peoples IPO programme. They were chosen because of stable cashflows and easily understood business models. The IPO of Astana Airways is likely to happen last of the initial three, partly because of its ownership structure (British aerospace firm BAE is a shareholder).
Although previously the target had been to have the first listing in 2011, Samruk-Kazyna said in late August that the initial three listings are now targeted for 2012. One banker reckons the firms could struggle even to list in the first part of 2012, as laws still need to be amended to allow discounts that will ensure the shares trade up in the secondary market.
The offerings will be done on a best-efforts basis, rather than via an underwriting process, partly because of the undeveloped nature of capital markets in Kazakhstan. Furthermore the shares will be sold to the four pension funds to which Kazakhs are obliged to contribute 10% of their salaries, and additionally, via local private-sector brokers, to private citizens.
The state shipping, power generation and gas transport companies are due to participate in the programme in a second phase, followed by the national rail firm. The national oil company and uranium miner will participate after 2015.