Russian steel giant Severstal, in the limelight after a proposed merger with Arcelor flopped, is seeking to raise up to $1.5 billion in a London initial public offering in October or November, banking sources said yesterday.

Banking sources close to the listing said Severstal has mandated Citibank, UBS and Deutsche Bank for the listing, which is expected to value the company between $12 billion and $15 billion, compared to its current Russian market capitalisation of $11.7 billion.

Severstal is seeking to float more than 10 per cent of its stock in the flotation, bankers said. Severstal's shares trade locally on Moscow's MICEX stock exchange where its free float is just around five per cent, bankers said.

An IPO worth $1.5 billion would make a Severstal placement Russia's third largest after state oil firm Rosneft's $10.4 billion flotation in July and Sistema's $1.6 billion listing last year.

Bankers said Severstal would give investors a play on global steel consolidation following a $32 billion takeover of Arcelor by Mittal Steel after a proposed merger between Severstal and Arcelor was rejected by the European steel giant.

"It's a great story, it's a reasonably well-managed company. It will go down well," one Moscow banker, whose bank is not involved in the flotation, told Reuters.

Severstal is 89 per cent-owned by Alexei Mordashov, who according to Forbes magazine is Russia's seventh-richest man.

Bankers said Severstal was pushing for an October-November timetable but they said there was a question mark over whether it could produce first-half 2006 financial reports in time for the IPO as required by the LSE, the world's largest stock exchange for foreign listings.