Analysis: Europe's IPO market hits bump but recovery still on course, bankers say

Douglas AG

25/03/2024 07:23

(Repeats MARCH 22 story with no changes)

        * 
      Global IPO issues fell in 2023 for second year
    

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      European IPOs scheduled for post-Easter listing window
    

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      Private equity holding $3.2 trillion in unsold assets
-Bain
    

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      Galderma Europe's biggest IPO since Sept 2022
    

  
    By Pablo Mayo Cerqueiro and Emma-Victoria Farr
       LONDON/FRANKFURT, March 22 (Reuters) - A strong debut by
Swiss skincare company Galderma  GALD.S  on Friday is steadying
nerves around Europe's IPO market, a day after a poorly received
listing from German retailer Douglas  DOU1.DE , bankers said.
    Galderma's debut on the Zurich stock exchange marked
Europe's biggest IPO since Porsche  P911_p.DE  in September
2022.
    Its long-awaited listing comes as billions of dollars worth
of European companies line up to go public.
    Those hopes risked being dashed after shares in CVC-owned
Douglas tumbled more than 12%. 
    Still, Galderma's shares soared above their issue price in
the first hours of trading, while overnight in New York social
media company Reddit  RDDT.N  saw its stock jump more than 48%.
    "Sentiment around IPOs continues to be positive globally and
in Europe, and those deals that are being prepared for Q2 and H2
are expected to come as planned," said Antoine de Guillenchmidt,
co-head of equity capital markets at Goldman Sachs for Europe,
the Middle East and Africa, who worked on the Galderma and
Douglas IPOs. 
    The trading of these two private equity-owned firms was
being closely watched by bankers and investors, after global IPO
issues fell in 2023 for a second year. 
    
    
    As M&A volumes hit decade lows, pressure has built on buyout
funds to sell companies, return money to investors and deploy
freshly raised cash. 
    
    UNSOLD ASSETS
    Private equity firms have been left with a staggering $3.2
trillion in unsold assets, restricting the return of capital
back to their investors and having a chilling effect on
fundraising, analysts at Bain & Co said.  
    But with central banks signalling an end to interest rate
hikes, the stock market is becoming a viable exit route.
    "Large private equity-backed transactions are a signal that
IPO markets are receptive," said Markus Meier, head of ECM in
Germany at Bank of America.  
    Europe has already seen some success stories this year. 
    Tank gear manufacturer Renk  R3NK.DE , the first newcomer to
the Frankfurt Stock Exchange this year, has almost doubled its
issue price of 15 euros since debuting in February. Its IPO was
one of several postponed last autumn amid uncertainty around
interest rates and geopolitical tensions.
    After Renk's debut, Douglas and Galderma both accelerated
their IPOs to take advantage of the positive mood.  
    CVC-owned Douglas raised 850 million euros ($920 million) to
pay off debt. Shares were priced at 26 euros, the bottom of an
indicated price range, and traded as low as 22.7 euros. 
    EQT-backed Galderma raised around to 2 billion Swiss francs 
($2.23 billion), with its shares opening at 61 francs on the SIX
Swiss Exchange, up 15% from the IPO's final price of 53 francs
per share, which was the top end of its indicated price range.
    
    CAUTION AHEAD
    To be sure, Douglas will have left a sour taste for those
investors who have lost money and could be a drag for some IPO
candidates.
    "We're still in the recovery phase, so we're not in an
anything goes environment but a selective environment," said
Martin Thorneycroft, head of cash ECM in EMEA at Morgan Stanley,
which co-led the Galderma IPO.
    Though caution remains, further new issues are to be
expected, Julian Schulze De la Cruz, a capital markets lawyer at
Noerr, said.
    Private equity firm Permira has been preparing an IPO for
Italian luxury brand Golden Goose - known for its worn looking
sneakers - as soon as the second quarter. Apollo-backed lender
OLB Bank has also said it is preparing to go public. 
    Fuel card provider DKV Mobility - another from CVC's
portfolio after Douglas - is also waiting to come back after
postponing its IPO plans last year. 
    CVC itself is expected to come to the market with an IPO
worth more than 1 billion euros as soon as after Easter, a
person familiar with the plan said.
    ($1 = 0.8987 Swiss francs)
    ($1 = 0.9241 euros)

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IPO deal valuations    https://reut.rs/4a097sn
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 (Reporting by Pablo Mayo Cerqueiro in London and Emma-Victoria
Farr in Frankfurt; writing by Anousha Sakoui; editing by Jason
Neely)
 ((pablo.mayocerqueiro@thomsonreuters.com))