IPO bankers may as well hit the beach until autumn

United Internet AG

26/01/2023 11:20

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Pamela Barbaglia
       LONDON, Jan 26 (Reuters Breakingviews) - Europe's frozen
equity capital markets are slowly thawing. After a market
shutdown that saw global ECM proceeds as measured by Dealogic
drop to their lowest level since 2003, a few hardy souls are
planning new initial public offerings. Even so, most
Europe-focused ECM bankers might as well spend the first half of
the year on the beach. 
    With a milder recession than expected and the Euro STOXX 600
 .STOXX  index up 7% this year, Germany’s United Internet
 UTDI.DE  is defying risks of a fresh tech selloff by pressing
ahead with a listing of web hosting and cloud infrastructure arm
Ionos. The IPO, which would allow minority investor Warburg
Pincus to cash out, could value the group at 5 billion euros.
Similarly, Apollo Global Management-controlled  APO.N  Italian
gaming firm Lottomatica and Tikehau-backed EuroGroup Laminations
have hired banks to explore a possible listing in the first
half.
    Big-ticket IPO candidates are less keen. When BASF's
 BASFn.DE  oil and gas business Wintershall Dea last mulled a
listing before the pandemic, the envisaged valuation was 20
billion euros. Yet a deal might now require a tangible discount
to attract risk-averse investors: peer Ithaca Energy  ITH.L ,
which went public in November, is trading 34% below its IPO
price. The relative lack of private equity deals also means
another long-awaited monster listing - the 20 billion euro-plus
float of buyout firm CVC Capital Markets – is on ice. 
    In most cases, delay looks the better option. Any company
with ropey earnings forecasts or which trades at a sluggish
multiple will find it safer to defer IPO plans to the second
half of 2023. Then they may be valued on their 2024 earnings
forecasts, which should be better. 
    That’s duff news for fee-hungry ECM bankers. The only
glimmer of hope is to decamp to the booming Middle East, or if
large private equity-held companies tire of waiting in limbo.
Swiss skincare firm Galderma - maker of Botox rival Dysport – is
one: owner EQT  EQTAB.ST  had to scrap a planned $22 billion
listing in Zurich after the Ukraine invasion last year. 
    The good news for bankers lamenting slim pickings is that
bosses already undertook an ECM cull last year after record low
IPO proceeds that on Dealogic numbers fell 82% in Europe. Those
remaining will likely have some rights issues to occupy their
time. But with European IPOs unlikely to motor until September,
they may as well front-end their time on the sun lounger.   
    Follow @pamela_msg on Twitter
    CONTEXT NEWS
United Internet’s subsidiary Ionos said on Jan. 17 it would
pursue an initial public offering on the Frankfurt Stock
Exchange in the first quarter of the year. The listing could
value Ionos at 5 billion euros, Bloomberg reported.
    Italy's electric motor components maker EuroGroup
Laminations said on Jan. 19 it planned to launch a share
offering in Milan as early as February.
    Apollo Global Management-backed gaming company Lottomatica
is working with banks on a stock market listing in the first
half of the year and could raise proceeds of at least 1 billion
euros. 
    BASF investors said on Jan. 19 that oil and gas business
Wintershall Dea's exit from Russia clears the way for plans to
take it public. The prospect of a stock market listing of
Wintershall Dea dates back to 2018 when BASF combined its oil
and gas division with that of Russian billionaire Mikhail
Fridman's LetterOne as part of a joint venture deal.
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 (Editing by George Hay and Streisand Neto)
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