Dealmakers eye Kazakhstan

The listing in London of Kazakhstan’s copper giant Kazakhmys this week could
herald the beginning of a boom for corporate financiers as other companies from
the former Soviet republics eye public listings.

Advised by E&Y, Kazakhmys is the first company from the former Soviet
Union to trade on the main board of the London Stock Exchange, and its listing
has prompted other Kazakh groups, including oil giant Kazmunaigaz and gold
producer Kazakhaltyn, to consider following suit.

This is thought to represent the beginning of a flood of listings from the
resource-rich Common- wealth of Independent States, which includes the Ukraine
and Russia, as well as Kazakhstan.

The flexible regulatory framework of the LSE and the deep pockets of
institutions have made London an attractive option for companies.

Investors, meanwhile, have developed an appetite for resources companies in
emerging markets, which offer the promise of more value than blue chip mining
stocks. Many analysts believe they are already trading at a premium on the back
of high commodity prices.

‘There are undoubtedly more listings on the way from the CIS. They will not
all be as big Kazakhmys, but its listing has been groundbreaking,’ said Michael
Lynch-Bell, a partner at Ernst & Young, the reporting accountants for

This fresh pool of clients, however, is not the only good news for deal
makers. The level of work involved in bringing a CIS company to the market is
also potentially very profitable.

On the Kazakhmys IPO, Ernst & Young deployed 156 staff and is expected to
rake in £6m in fees.

In emerging markets risks are higher and extra layers of due diligence work
are required. Ownership of the assets, which switched from public to private
hands after the fall of Communism, has to be established.

The different approach to accounting between the West and Russia also needs
to be reconciled.

‘The information in CIS accounts is focused on cash flow and costs, and needs
to be adapted,’ Lynch-Bell said. ‘There is a strong focus on complete accuracy
whereas in western markets, where things move faster, figures vary within a
certain range.’

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