Amtel-Vredestein Valued at $742 million after London IPO

Amtel-Vredestein’s London IPO has raised $201 million from the sale of 27.1 per cent of its shares, valuing the company at $742 million in total. The total value is less than the $1 billion the company had hoped for, although insiders are said to be pleased with the result.

Amtel-Vredestein lowered the price of its initial public offering after some investors shied away from the initial price range. News sources had also reported that the placement looked expensive compared to the $70 million the company got for selling a 12.4 per cent stake to Russia’s Alfa Group and Temasek Holdings, Singapore’s state-owned investment company, in July.

A source familiar with the placement told the Vedomosti business newspaper that Amtel Vredestein shareholders submitted 4.4 million shares for the placement, while the remaining number (from a total of 18.3 million) were issued specifically for the placement. The company itself received $153 million from the placement, while its owners received $48.4 million. The company did not disclose which shareholders sold their shares.

Some analysts told Mosnews.com that they were dissatisfied with the placement’s result, but noted that $11 per GDR was a “fair price for Amtel shares from the very beginning.” Amtel cut its offer price to between $11 and $12 per share from $13 to $16, said Dmitri Kryukov, who manages $300 million in Russian assets at Moscow-based Kazimir Partners, a purchaser Amtel shares. “Some investors may have decided Amtel’s price premium to international rivals was too high,” Kryukov told Bloomberg.

The company’s IPO follows soaring car sales in Russia, which are up by 10 per cent this year. The number of cars on Russia’s potholed roads has already more than doubled in the last decade. Amtel estimates there are 171 cars on the road per 1000 Russians and expects the number to climb to 300 per 1,000 in the next decade, putting Russia on a par with car ownership in central Europe.

In 2004 Amtel produced 14.4 million tyres and earned £256 million in revenue, a 20 per cent increase on the year before. The company controls 35 per cent of the Russian market and 30 per cent of the Ukrainian market, The Business Online reported.

Investment bank Troika Dialog wrote in a recent report: “The Russian competitive tyre market is still in its infancy. Passenger tyre sales were the equivalent of $6 per capita in 2003, compared with $8 in Turkey and $11 in Brazil and Malaysia.” Other traditional cold climate countries, such as Canada, Norway and Finland, where drivers require a separate set of winter tyres, are even further ahead, with sales of $35-39 per capita. The US boasts a massive $79.