IPO WATCH: Volatile Markets Fell More Deals In Europe
June 23 2011 - 11:36AM
Dow Jones News
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;
margot.patrick@dowjones.com
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