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Rusal IPO Likely to Be Priced Above Midpoint

HONG KONG — Russian aluminum giant UC Rusal Ltd. has support, including from French insurer AXA SA, for its dual Hong Kong and Paris initial public offering, and will likely price the deal above the midpoint of its indicative price range, people familiar with the situation said Wednesday.

Based on the size and quality of the order book, the company's price guidance, which has been sent to all investors, is HK$10.80 to HK$12.00 (US$1.39 to US$1.55) a share, the people said.

Rusal is selling 1.61 billion shares in an indicative range of HK$9.10-HK$12.50, to raise US$2.59 billion. It has the option of increasing the deal size 15% to raise US$2.9 billion.

Some institutional investors are likely to put in limit orders at the bottom of the IPO price range. A price guidance gives investors an idea about where the deal will be priced, allowing them to adjust their orders accordingly.

The people declined to comment on the amount of orders received so far, saying only that demand came from quality institutional investors, including leading sovereign-wealth funds in Asia, the Middle East and Europe as well as Hong Kong tycoons.

"We see enough demand from institutional investors for the IPO to go ahead at the lower end of the range, even without the support of the cornerstones. Thus, we expect the pricing to be rather high, reflecting the rise in nickel and aluminum prices in recent months," one of the people said.

Rusal's order book was covered just three days after book building started Jan. 12, with 40% of the deal taken by four cornerstone investors: Malaysian tycoon Robert Kuok; Russian state development bank Vneshekonombank; NR Investment Ltd., the investment vehicle of Nathaniel Rothschild; and investment company Paulson & Co. Inc., the hedge fund run by John Paulson.

Hong Kong blue chip Cheung Kong (Holdings) Ltd. (0001.HK) said last week it had subscribed to US$100 million worth of Rusal shares.

AXA has also placed an order, one of the people said, declining to disclose the amount.

French business daily La Tribune reported Monday that AXA planned to take a "significant stake" in Rusal. The insurer declined to comment Wednesday.

Rusal's pricing is scheduled for late Thursday.

BNP Paribas SA and Credit Suisse Group are the joint sponsors, global coordinators and bookrunners of the IPO.

Bank Of China International, Bank of America Corp., Nomura Co., Renaissance Capital, Sberbank and VTB Capital are the joint bookrunners.

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