The Mongolian government is looking to launch a multibillion dollar initial public offering of a mega coal deposit ahead of parliamentary elections in June, with plans to list state-owned Erdenes-Tavan Tolgoi Co. in London and Mongolia, people familiar with the situation said.
One of the people said that an eventual secondary Hong Kong listing of the company, which controls the world’s largest coking-coal deposit in the South Gobi Desert near China’s northern border, is also probable.
“We are trying to go for the IPO before the elections,” a senior Mongolian government official said, adding that a ministerial reshuffle is likely next week, after which a task force would be set up to look into the IPO process.
Another person said that getting certain financial terms translated into Mongolian is taking a long time, and the fact that every Mongolian born before March 2010 stands to get shares in the IPO is tough to administer.
The plan to list Tavan Tolgoi in Hong Kong at the same time as in London and Ulan Bator was dropped because Mongolia isn’t among the overseas markets from which Hong Kong approves listings, and Hong Kong isn’t likely to give special dispensation to allow the Mongolian-incorporated company to list ahead of the elections, one of the people said. U.K. rules allow listings from any country.
The company plans to list in London by issuing global depositary receipts, which are easier to get approval for but tend to have lower liquidity than primary shares.
“The company is focused on listing in London, which is a resource hub and also has close links with the Mongolian exchange,” one of the people familiar with the situation said. “What’s difficult is getting a primary listing in London, which is only possible for U.K.-domiciled firms, but can’t be done by the June time frame.”
A company is able to raise funds by listing in the form of global depositary receipts, which would normally be issued by a depositary in a single location such as London or Luxembourg.
The government plans to sell as much as a 30% stake in Tavan Tolgoi to international investors as well as another 10% to local companies. It also plans to give 10% to Mongolian citizens and the government would hold about 50%.
A $2 billion-$3 billion fund raising could value Tavan Tolgoi at around $10 billion and double the market capitalization of Ulan Bator’s stock exchange.
Goldman Sachs Group Inc., Deutsche Bank AG, BNP Paribas SA and Macquarie Group Ltd. are handling the Tavan Tolgoi IPO.
Source: Wall Street Journal Online