IPO WATCH: Evonik, Georgian Railway Show Twin-Track Europe
May 25 2012 - 10:38AM
Dow Jones News
Evonik Industries AG's decision to press ahead with a Frankfurt
listing as Georgian Railway pulls a planned London float highlights
Europe's increasingly divided equity capital markets landscape,
with the relative strength of German companies and the benchmark
DAX index at odds with volatility and gloom elsewhere in
Europe.
Specialty chemicals maker Evonik said Friday that it would
launch what could be Germany's biggest IPO since 2000, raising up
to EUR4.5 billion. By contrast, Georgian Railway, the state rail
monopoly for the former Soviet state, Thursday said it had
postponed a London listing of global depositary receipts set to
raise up to $250 million.
"This relates to Germany as an economy and a destination for
investor sentiment," said Martin Steinbach, IPO leader at Ernst
& Young for Europe, the Middle East, India and Africa.
"Investors are showing their confidence in the underlying
economy."
The twin moves highlight that German companies preparing to list
in Germany are likely to have an easier reception than companies
listing anywhere else in Europe in the short term, boding
positively for H.C. Starck, another chemicals group, insurance
group Talanx AG and Siemens AG's (SI) lighting unit, Osram, all of
which are evaluating IPOs this year.
H.C. Starck, which reactivated its IPO process last month after
earlier putting a float on hold, is owned by private equity firms
Advent International and Carlyle Group LP. Talanx, Germany's
third-largest insurance group, said in March conditions were
positive for an IPO but added that the group might call off its
plans if markets deteriorate. Talanx most recently said an IPO was
being evaluated. Siemens said this week it looking at an IPO for
its Osram lighting unit in the third quarter.
London dominates equity capital markets activity in Europe and
will likely continue to do so, industry watchers say, cautioning
against any assumption that there's a long-term trend away from the
British capital's dominance. But in the short term, relative
confidence in the German economy and outperformance of its blue
chip DAX index could make Germany a more appealing destination for
large cap-stock issuance while other European markets--including
recession-hit London--are being battered by continuing uncertainty
over Greece and the threat of wider contagion.
"If there's an IPO market that's open in Europe at the moment,
it's Germany," one equity capital markets professional told Dow
Jones Newswires on Friday.
Europe's IPO market has battled volatility and see-sawing
confidence since the financial crisis of 2008 and 2009, with brief
periods of optimism among issuers interspersed with longer periods
of gloom.
The IPO market saw a brief period of optimism this year,
following a period of very limited capital markets activity through
the second half of 2011.
Netherlands cable firm Ziggo NV (ZIGGO.AE); Swiss business
services group DKSH Holding Ltd. (DKSH.EB); and Ruspetro PLC
(RPO.LN), a Russia-focused oil exploration firm, listed
successfully in Amsterdam, Zurich and London, respectively, and all
are trading above their list price.
But market observers say the confidence that brought these
companies to list stock has since waned against a drumbeat of bad
news from the more troubled parts of Europe and that window has
since closed again in most European markets.
But Germany's benchmark index has risen 8% year to date,
compared with a 4% drop for the U.K.'s benchmark FTSE 100 and
France's CAC 40, down 1.6%. Broadly speaking, this reflects the
relative health of those economies, with Germany showing growth
compared with a flatlining French economy and recession in the
U.K.
London has appeared to suffer more than other potential IPO
destinations. In addition to Georgian Railway, two companies, bid
vehicle Tungsten and Russian real estate group 01 Properties, have
also pulled or delayed planned London listings in the past
month.
Equity markets professionals are sanguine about the impact of
the current turbulence on London.
"London is very much open for the right companies," Craig Coben,
head of European equity capital markets at Bank of America Merrill
Lynch, told Dow Jones Newswires. He notes that London remains the
preferred destination for emerging market companies looking to
list. The U.K. is still Europe's biggest market for stock issuance
by far. U.K. IPOs have generated $618 million this year so far,
compared with just $7 million for Germany, according to figures
from Dealogic.
But Coben concedes that companies listing in what he calls
"creditor countries" have materially outperformed those listing in
countries with deficits.
- By Jessica Hodgson; Dow Jones Newswires; +44207 8429373;
jessica.hodgson@dowjones.com.
(Friedrich Geiger in Frankrfurt and Marietta Cauchi contributed
to this article.)
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