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Market jitters over Greece and a slower-than-expected U.S. economic recovery felled more deals in Europe this week, with France's Verallia, the Netherlands' Agendia and Germany's Prime Office AG all nixing their IPO plans because of unfavorable conditions.
Those indefinite postponements followed the pulling of an IPO for Telefonica SA (TEF) unit Atento two weeks ago, as investor worries over the health of indebted euro-zone economies were re-ignited by the deepening sovereign debt crisis in Greece.
A year after its first bail-out by the International Monetary Fund and European Union, Greece needs additional financial aid that is being seen by many analysts as an interim measure before an eventual default.
Verallia, a glass packaging unit of Compagnie de Saint-Gobain SA (SGO.FR), pulled its offer late Monday, citing "market uncertainty and volatility." People in the market said the deal was hit by a profit warning last week by U.S.-based rival Owens-Illinois Inc. (OI) that made potential investors think twice about buying Verallia shares. Owens-Illinois said its second-quarter earnings would be hit by weakened demand for wine and beer bottles in Australia and New Zealand and high fuel prices and supply chain issues in North America.
Saint-Gobain had aimed to raise around EUR870 million by floating a 40% stake in Verallia.
In the Netherlands, cancer testing company Agendia put its EUR75 million IPO on hold the same day, for the same reason of "volatile and uncertain" markets. And Prime Office on Wednesday said it would review its options after a postponement due to "volatile market conditions." It was looking to raise around EUR250 million in new capital and up to EUR150 million for selling shareholders.
Bankers this week said such cancellations are inevitable when investors are preoccupied with risks that could lead to further falls in stock markets. Most IPOs sold in Europe this year are trading below offer price, while the equity funds and hedge funds that typically buy shares in offers have also registered losses.
"Investors are feeling the pressure. They're having a difficult time making money, and making performance fees is going to be tough," Craig Coben, head of EMEA equity capital markets at Bank of America Merrill Lynch, told reporters at a briefing Wednesday. He said that has led many of the market's regular participants in IPOs to put in smaller-than-usual orders, or even avoid deals entirely.
In one bright spot, Vallares PLC (VLRS.LN), a cash shell set up by investors including former BP PLC (BP) chief Tony Hayward and hedge-fund magnate Nat Rothschild, Friday raised $2.18 billion, far more than the $1.6 billion it had been targeting. The vehicle will now seek to use its capital to find and buy attractive oil and gas assets in emerging markets.
The next big test for the market will be the IPO of Bankia, the Spanish bank formed from a merger of seven regional banks. It is to issue a prospectus next week and start meeting with investors about a EUR4 billion share sale, with the challenge of convincing potential buyers that Spain won't go the way of Greece and need outside aid.
-By Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451; firstname.lastname@example.org