Three Russian metals companies each with market caps of at least $7bn (£4.4bn) are making strides towards inclusion in the FTSE 100.
The question: should London welcome them?
If the argument against inclusion is simply that the FTSE should be the sole domain of British firms, that is silly.
But there are genuine reasons to be concerned about the inclusion of three oligarch-owned resource companies — Polyus Gold, Polymetal and Evraz — in London’s main index.
For starters, Polyus, Russia’s largest gold miner, is trying to list with a free float of only 13 per cent — less than ENRC’s 18 per cent, which currently has the smallest free float of all FTSE 100 companies. That’s hardly a good comparison and investors have already expressed their unease.
Polyus’ majority owners (with about 80 per cent of the firm) are tycoon-turned-politician (and back again) Mikhail Prokhorov, whose business interests range from the NBA to investment banking, and Kremlin-connected oligarch Suleiman Kerimov, a key shareholder in global fertiliser leader UralKali and employer of footballers Roberto Carlos and Samuel Eto’o.
Evraz is likely to comply with the free float requirements but that’s not the only concern. Alexander Abramov, the non-executive chairman of Russia’s biggest steelmaker, has a stake in Lanebrook, the investment company part-owned by Roman Abramovich that is the majority shareholder, meaning Evraz’s board would not comply with the governance standards for a company with a premium listing.
In addition, Evraz is not planning to move to quarterly reporting (it currently only provides accounts on a half-yearly basis), according to the note by Citigroup, which we discussed in our previous post on all things Russian.
Polymetal meanwhile made a bold first governance step with the appointment of South African Bobby Godsell, the highly-regarded former chief executive of AngloGold Ashanti, as chair of the board of its new Jersey incorporated holding company.
The three main shareholders at Polymetal are ICT Group, owned by Alexander Nesis (19 per cent), who also has a significant holding in UralKali; Czech private equity firm PPF Group led by Peter Kellner (20 per cent); and Russia entrepreneur Alexander Mamut (9 per cent) – the man behind Waterstones and HMV.
FTSE inclusion would be good news for the Russian trio, boosting liquidity in their shares and broadening their investor bases, as FT Alphaville reported earlier.
But whether London would benefit from more emerging markets-focused resource companies is another question entirely.
Related links:
Russians and the FTSE – what do the Russians get? – FT Alphaville
The FTSE 100: From Blue Chip to Fool’s Gold – WSJ
Abramovich switch tests FTSE 100′s mettle – FT