Russia’s attempts to woo foreign investors have suffered a setback with Goldman Sachs pulling out of a role as lead bank on an international equity offering by Russia’s second biggest mobile phone operator at the 11th hour due to corporate governance concerns.
Goldman Sachs withdrew as an adviser on Megafon’s London-Moscow equity offering amid concerns on recent comments by oligarch Alisher Usmanov, the magnate who is the company’s controlling shareholder, according to people familiar with the matter.
Mr. Usmanov, who has steel interests and a big stake in Arsenal football club, last month told Reuters he planned to merge his assets under a single umbrella company.
Mr. Usmanov said the assets would be held under the ownership of himself plus two partners: Farhad Moshiri, another Arsenal shareholder, and Vladimir Skoch, the father of Mr. Usmanov’s longtime business partner Andrei Skoch.
People familiar with the matter said that Goldman was concerned it would be working on an IPO where the company’s controlling shareholder was currently undergoing a restructuring.
Ivan Tavrin, Megafon’s chief executive, said the company had made a final decision about the banks on the deal a week ago, and suggested that Goldman had been the only bank on the deal to disagree with Megafon’s preferred October 9 launch date for the offering.
“This is [a] process where all the horses need to run on one time and it’s quite a challenging job for a company to manage six banks in one process. Everybody should be on the same page in terms of timing,” he said
Goldman Sachs declined to comment.
The departure of Goldman is a blow to Megafon’s plan to sell an up to 20 per cent stake before the end of the year in one of the biggest Russian equity offerings in London since 2008, and for other groups from the region that hoped to follow in Megafon’s footsteps. It had hoped to raise up to $3 billion in the issue.
Morgan Stanley and Sberbank are currently the two joint coordinators on the deal, while Citi, Credit Suisse and VTB are joint bookrunners.
Mr. Usmanov plans to keep his 50 per cent plus one share in Megafon, while his co-shareholders – TeliaSonera on Sweden and Megafon itself – plan to sell roughly 10 per cent each. The company will sell equity in the form of ordinary shares in Moscow and global depositary receipts in London.
Additional reporting by Daniel Thomas and Alexandra Stevenson in London