Deutsche Annington revives IPO, with lower ambitions (updated)

Polski Holding Nieruchomosci SA

09/07/2013 17:54

* Price range cut to between 16.50 euros and 17 euros * Volume of IPO reduced to 34.8 million shares * Terra Firma cuts number of shares it plans to sell * Start of trading planned for Thursday * Bookbuilding ends oversubscribed at lower range - sources (Adds end of bookbuilding, indication of price range) By Arno Schuetze and Alexander Hübner FRANKFURT, July 9 (Reuters) - Deutsche Annington  ANNGn.DE , Germany's largest residential real estate company, is taking a fresh stab at a stock market listing, albeit with lowered ambitions a week after its initial attempt failed.  The firm, majority-owned by private equity group Terra Firma TERA.UL , said on Tuesday that its initial public offering (IPO) would seek to raise 575-592 million euros ($740-762 million), compared with an original goal of up to 1.2 billion euros.  Two people familiar with the matter told Reuters on Tuesday afternoon that the books for the IPO had closed with only the lower end of the price range oversubscribed. The subscription was at 16.50 euros to 17 euros per share. The two sources said the books were oversubscribed by three to four times at the lower end of that range but were not oversubscribed at the top end. "This indicates that the final price will likely be between 16.50 and 16.75 euros," one of them said. Terra Firma, led by British financier Guy Hands, has sharply reduced the number of shares it plans to sell, while the company is aiming to raise broadly the same amount as before from offering new shares to pay down debt.  After a strong start to the year, Europe's IPO market has shown signs of faltering recently amid volatile equity markets and as jittery investors drive a hard bargain over price.   Deutsche Annington's IPO comprises 34.8 million shares, or a 15.5 percent stake in the company. On Tuesday morning it set the revised price range of 16.50 euros to 17 euros apiece, down from a previous range of 18 euros to 21 euros.   The new range valued the group, which owns 180,000 apartments, at up to 3.8 billion euros, well below its net asset value of 4.25 billion euros and at a discount to many peers, which have been trading close to their net asset value.    UNDER PRESSURE Terra Firma was looking for up to 180 million euros from selling Deutsche Annington shares, compared with its original hope of raising more than 700 million euros.  The private equity firm is best known for its purchase of music group EMI, which it later lost to Citigroup after defaulting on its loans.  Investors said Hands' firm, which has also invested in groups as diverse as aircraft leasing firm Awas, cinema operator Odeon & UCI, German motorway services group Tank&Rast and British housing group Annington Homes, was likely to try to sell more shares in Deutsche Annington after its listing.  "Because Terra Firma will place further stakes (in Deutsche Annington) in the medium term, the stock will stay under pressure," one Frankfurt-based institutional investor said, speaking on condition of anonymity. The bulk of money from the share sale will flow into the coffers of Deutsche Annington, which plans to use gross proceeds of about 400 million euros to refinance its business.  "A successful IPO enables us to accelerate the diversification of our funding", Chief Executive Rolf Buch said. Deutsche Annington, formed by Hands in 2001 after snapping up 11 German railway workers' residential housing companies, plans to issue unsecured bonds to refinance older securities at lower interest rates.  It would need a BBB credit rating to make such a move, which rating agency Standard & Poor's has indicated it could get after its IPO if it cuts debt by 400 million euros to 5.2 billion.  One European equities fund manager, who declined to invest in the original offer, said he felt the revival smacked of desperation. "We'll need to revisit the valuation tables," he said, when asked whether the new price was low enough. Germany's relative economic strength and low investment yields in other asset classes, such as government debt, have sparked a upswing of interest in the property market. LEG Immobilien  LEGn.DE  was the first German property company to list its shares this year, raising 1.2 billion euros in January. The European property sector has also seen a string of flotations this year, including British estate agency Countrywide  CWD.L , British housebuilder Crest Nicholson CRST.L  and Polish real estate group PHN  PHN.WA .  Deutsche Annington's on-off IPO resembles the run-up to German insurer Talanx's  TLXGn.DE . The latter revived its IPO plans in September, a week after scrapping them when investors balked at the price it wanted for its shares.  ID:nL5E8KK8L0   ($1 = 0.7773 euros) (Additional reporting by Sinead Cruise and Kathrin Jones; Writing by Marilyn Gerlach; Editing by Mark Potter and David Goodman) ((arno.schuetze@thomsonreuters.com)(+49.69.7565.1197)(Reuters Messaging: arno.schuetze.reuters.com@reuters.net)) Keywords: DEUTSCHEANNINGTON IPO/