People with knowledge of the deal suggested that Promsvyazbank could still find ways to sell part or all of the 25 per cent stake, either through a private equity deal, or a private placement, noting that certain funds had expressed interest in such a transaction during the roadshow.
Another option would be trying to complete the initial public offering at a later date, they said, perhaps with the new private equity partner selling out.
The deal is a setback for Russian IPO hopefuls, which are attempting to stage a return to equity capital markets this autumn for the first time in more than a year.
While last month’s $5.2bn Sberbank London-Moscow secondary public offering was meant to open the door for Russian peers, the collapse of the Promsvyazbank deal suggests its rival’s success may prove the exception and not the rule.
One Moscow-based investor who said his fund had decided not to participate in the Promsvyazbank offering expressed concern about some companies in the Russian financial sector, which he said was "less than transparent than other industries . . . and harder to be confident about”.
Last week Eurasia Group, the political risk consultancy, expressed concern about Promsvyazbank in a note to clients. The bank’s tier one capital was just barely above the required 10 per cent threshold at the end of the first half, the consultancy noted, while Dmitry Ananiev, one of the bank’s two oligarch owners, has experienced political difficulties in recent years, a problem in a sector where state-owned and state-favoured banks have a considerable advantage.
Promsvyazbank had hoped to sell a 25 per cent stake with shares valued at $10-$12. The bank has Rb33.5bn ($1.1bn) under management and counts the European Bank for Reconstruction and Development as a shareholder.
The deal’s collapse comes despite the successful, albeit small, $311m placement of Russian private healthcare company MD Medical Group last week. The deal relied on the state-owned Russian Direct Investment Fund and the UK’s BlackRock which signed on as anchor investors and invested a collective $50m in the offering.
Mobile operator Megafon is the next Russian company set to list in London, after last week announcing plans for a London-Moscow offering of up to $3bn.
The company, which this week agreed to pay $1.3bn for control of Euroset, Russia’s largest handset retailer, faced a stumbling block last week after it announced that Goldman Sachs would no longer be a lead bank on the offering. People with knowledge of the decision said Goldman had pulled out because of corporate governance concerns.