beyondbrics

What does VTB Capital want with a stake in Oleg Deripaska‘s holding company? VTB’s investment banking arm announced on Tuesday it had bought a 4.4 per cent stake in En+ for $500m because of the group’s ”great potential” in energy, mining and metals.

While the deal might appear to be evidence that Deripaska (pictured) is in need of further financing, it actually appears to be a good move for both parties involved.

According to both groups, the agreement  is the first step in preparing En+ for an initial public offering in Asia within the next two to three years. Meanwhile, Artem Volynets, En+’s chief executive, told Bloomberg that VTB Capital (VTBR:MCX) was one of several investors who were discussing buying into the company before the IPO.

Leonid Slipchenko, an analyst at Uralsib Capital in Moscow, says VTB Capital’s connection to En+ is fairly logical. The investment bank worked as a joint-bookrunner on Rusal’s IPO in Hong Kong last year, and a organiser of the listing of Deripaska’s power utility, EuroSibEnergo, which was meant to float in Hong Kong last year but postponed it.

Slipchenko adds that the deal comes at a time when VTB Capital has already become active in flipping stakes: the investment bank bought 19 per cent of Rosbank from Societe Generale in December only to sell it back to the french bank a few months later, allowing the foreign lender to consolidate its assets in Russia – and VTB Capital to make a quick profit.

Because the size of the En+ stake sale is relatively small at $500m, Slipchenko dismisses the notion that Deripaska would need the deal for refinancing reasons. Instead it looks like VTB Capital may simply be looking to take advantage of Russian industrial companies’ strong ties to China, and the numerous Russian offerings in Asia that have been predicted but may or may not come over the next few years.

While Rusal’s decision to list in Hong Kong in February 2010 initially prompted forecasts that Hong Kong would outpace London as a new hub for Russian listings, the predictions have come to naught, largely thanks to Rusal itself, which saw shares fall sharply following its debut.

EuroSibEnergo, another En+subisidary, was supposed to follow in Rusal’s footsteps with plans for an up to $1.5bn IPO in Hong Kong to repay debt and fund future projects last autumn, but was forced to postpone the deal, while Strikeforce Mining and Resources, another Deripaska asset, pulled its offering entirely.

So where does this leave En+? Selling a small amount of shares to a few initial investors sends a signal that the company is moving in the right direction. The question is whether – following the pratfalls of Rusal, SMR and EuroSibEnergo - Asian investors will be willing to take a chance on Deripaska again.

Related reading:
Lunch with the FT: Oleg Deripaska
Russia: spinning VTB’s sale plans