UPDATE 2-Essar launches $2.5 bln London energy IPO – sources

* London IPO priced at 450-550 pence a share

* Second-largest IPO by an Indian firm

* Likely to be biggest London IPO since 2007

* Essar to have market cap of $9.5-$11 bln on listing
(Adds details, background)

By Pratish Narayanan and Tony Munroe

MUMBAI, April 22 (BestGrowthStock) – Indian conglomerate Essar
Group on Thursday launched an initial public offer in its
energy and power businesses to raise about $2.5 billion, said
three sources with direct knowledge of the matter, in what is
set to be the biggest IPO in London since 2007.

The group is selling a 20-25 percent stake in Essar Energy
to institutions as it looks to tap new investors to fund its
ambitious growth plans, including buying coal mines to expand
power capacity, and the development and exploration of oil and
gas blocks.

New shares will be issued in a range of 450-550 pence each
in an offering that will close on April 29, the sources told
Reuters. The sources did not wish to be named as they were not
authorised to speak with the media.

Listing on the London Stock Exchange is expected in the
first week of May, one of the sources said.

The group’s energy and power operations, including four
existing plants with a total installed capacity of 1,220
megawatts, will have a market capitalisation of $9.5-$11
billion upon listing, the sources said.

A rush of energy IPOs in India from firms such as JSW
Energy (JSWE.BO: ), Oil India (OILI.BO: ), NHPC (NHPC.BO: ) and
Indiabulls Power (INDP.BO: ) in recent months, and more in the
pipeline, has crowded the market, prompting Essar to look

A London listing also gives Essar access to a much deeper
investor base, sources close to the deal have told Reuters.

This will be the second-largest IPO by an Indian firm —
behind Reliance Power’s (RPOL.BO: ) $2.9 billion offering in 2008
— and will be London’s biggest IPO since 2007 if it tops
Netherlands-based New World Resources’ (NWRSsp.PR: ) near-$2.5
billion raising in 2008, according to bankers and Thomson
Reuters data.

It will rank as the third-largest share sale by an Indian
firm, following private-sector lender ICICI Bank’s (ICBK.BO: )
$4.6 billion follow-on sale in the United States in 2007 and
the Reliance Power IPO.


The offering would help expansion plans at Essar,
controlled by billionaire brothers Shashi and Ravi Ruia, who
are worth a combined $13 billion according to Forbes and
founded Essar in 1969 following the death of their father.

They began operations by building an outer breakwater at
the Chennai port in southern India and have since rapidly
expanded the group, whose interests now include shipping,
steel, refining, power and telecoms.

The group has embarked on a string of deals, buying U.S.
coal producer Trinity Coal Partners LLC for $600 million, and
the Aries coal mines in Indonesia for about $175-$200 million
— part of a strategic drive to source raw materials for its
global steel and power operations.

Trinity Coal will help fuel the company’s North American
steel operations, including its Essar Steel Algoma [ESSRGE.UL]
facility in Ontario, Canada.

Essar Oil (ESRO.BO: ), a group firm, is in talks with Royal
Dutch Shell (RDSa.L: ) to buy three European refineries. The
group would consider buying these in May or June.

Essar Oil, which runs a 280,000 barrels-per-day (bpd)
refinery in western India and owns a 50 percent stake in a
Kenyan refinery, is pursuing the deal as part of plans to have
a refining capacity of 1 million bpd.


After the share sale, Essar Energy will be considered for
inclusion in the FTSE 100 index (.FTSE: ), the company has said
previously. Essar Energy is incorporated in the UK, and has its
registered office in London and its head office in Mauritius.

JP Morgan Cazenove (JPM.N: ) is the sole financial adviser
for the offer, while it and Deutsche Bank (DBKGn.DE: ) are joint

The Essar Group will retain a minimum of 75 percent of
Essar Energy’s issued share capital.

Ravi Ruia, group vice chairman, will move to London to
spearhead the global business, two sources with direct
knowledge of the matter previously told Reuters.

In February, Essar sold its telecoms tower unit to American
Tower Corp (AMT.N: ) for about $432 million, [ID:nSGE61O01W] and
in November, it agreed to buy a majority stake in Dhabi Group’s
telecommunication businesses in Uganda and Congo.

Essar is Vodafone’s (VOD.L: ) partner in India’s No.3 mobile
firm, Vodafone Essar. It holds a 33 percent stake in Vodafone
Essar and holds less than 10 percent in another Indian telecoms
firm, Loop Mobile.
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(Reporting by Pratish Narayanan and Tony Munroe; Editing by
Ranjit Gangadharan and Ian Geoghegan))

UPDATE 2-Essar launches $2.5 bln London energy IPO – sources