Despite the wave of IPO postponements in 2022, corporate sellers are adjusting to new valuation benchmarks and will be the most likely to pursue IPOs for their assets this year, sources say. Cornerstone investors will be key to solidify books in such volatile markets, they added.
Italian energy conglomerate ENI [BIT:ENI] was the latest high-profile company to postpone a listing. It delayed the IPO of retail gas and renewables division Plenitude when Russia’s decision to cut gas supplies to Europe put pressure on valuation during bookbuilding, this news service reported.
But several sources close to the deal now say it is likely to be back before the end of the year.
“When the market restarts, Plenitude will try again,” said one. “It is hoping for a fair valuation, although it won’t be the maximum valuation ENI had hoped to achieve. It is still a great company despite markets not being optimal during the first attempt,” he added.
ENI could be joined in the H2 IPO market by German Thyssenkrupp [ETR:TKA], potentially seeking a listing for its hydrogen business Nucera this year, and Swiss ABB [SWX:ABBN] with the potential sale of its e-mobility unit.
And, of course, there are still hopes of a European IPO blockbuster, as VW [ETR:VOW3] aims to float Porsche this year. A source close to the transaction said he is still hopeful of a listing in 2022 despite volatile equity markets.
“There are going to be IPOs in September, but I think most are going to come from corporate sellers,” said an ECM banker. “Private equity sellers can sit out in a bad market, but corporates have a strategy to execute on and therefore are more willing to move ahead even if it means a lower valuation.”
Private-equity backed IPOs, while almost non-existent this year, have been on the decline since peaking in the first quarter of 2021, the height of Europe’s most recent IPO bull market. Poor trading in large transactions, such as Bridgepoint Group [LON:BPT]-backed Deliveroo [LON:ROO], caused backlash against an overheated IPO market.
Valuations came under pressure and sponsor-backed IPOs dropped off considerably in 2H21 with large corporate deals such as the USD 2.7bn listing of Volvo Cars [STO:VOLCAR-B] in Stockholm and a USD 1.8bn IPO of Spanish renewable energy company Acciona Energia [BME:ANE], driving the market.
Non-sponsored IPOs have continued in EMEA in 2022, although most of the issuance has been driven by listings in Middle East. But deals in the region have similar characteristics to many corporate IPOs in that they are strategic and with less price sensitive sellers, focused on aftermarket performance.
Italian water technology and hydrogen company Industrie De Nora [BIT:DNR], the largest European IPO to price in the pre-summer window, had to discount its valuation to raise strategic growth capital for acquisitions, its CEO told this news service this week. The deal was driven by the De Nora family alongside minority corporate shareholder SNAM [BIT:SRG]
In Spain, Opdenergy also decided to pull the trigger on an IPO this week, seeking EUR 200m in growth capital.
Sellers attempting a 2022 deal will have to be “price takers”, just like De Nora. The theme extends to private markets, after Swedish fintech (and once IPO hopeful) Klarna completed a fundraising at a meagre USD 6.5bn valuation, a staggering 86% drop from its implied USD 45.6bn price tag in June 2021.
Strong foundations
De Nora may also be a blueprint on the cornerstone front. At launch, two family offices, SQ Invest SpA, the investment vehicle of the Garrone family who own Italian energy firm ERG [BIT:ERG], and 7-Industries Holding, both agreed to take EUR 100m each worth of shares at the final offer price.
De Nora’s CFO Marco Porro told the ECM Pulse that the industry cornerstones gave credence to the company’s long-term industrial strategy and helped drive large investors into the book, including sovereign wealth funds Norges Investment Management and Malaysia’s Khazanah Nasional, as reported.
Three bankers speaking with the Pulse predict that cornerstones, also a regular feature in Middle Eastern IPOs this year, are likely to play a more important role in Europe after falling out of favour last year.
“There was a period in 2020 and 2021, starting with the IPO of JDE Peet’s [AMS:JDEP], where cornerstones felt like a pre-requisite,” said one. “But then there were a couple of disastrous deals with cornerstones, like Deliveroo and Alphawave [LON:AWE], and other investors then became very sceptical and pushed back against it.
“But they are now coming back in a big way,” he added.
The market is yet to see the return of large institutional investors acting as cornerstones. However, that is not to write off the possibility of their return.
“We would absolutely look at engaging with an IPO as a cornerstone,” said a source at a large institutional ECM investor. “Our only reservation is that we would want to be hyper-conscious on who is in the book with us and making sure that quality does not drop off beyond the top lines.”
Porsche, VW, Thyssenkrupp and ENI did not respond to requests for comment. ABB declined to comment on this story
