Underwater IPOs – Could Nexi become newest member of notorious club? - The Morning Flash

News Analysis 19 October

Underwater IPOs – Could Nexi become newest member of notorious club? - The Morning Flash

Nexi [BIT:NEXI] may be heading towards membership of an increasingly popular yet notorious club. 

Reported takeover interest from financial sponsor CVC and others comes at a time when the EUR 8.5bn market cap payments provider is trading much lower than the EUR 9 per share at which it listed on the stock market only a few years ago. 

Acquisitions of companies at prices far below where they listed has become an unfortunate dealmaking trend which in part explains the current dearth of IPOs in Europe. 

Plenty more names are on the potential takeover radar among large companies which have listed since 2019 following a period of financial sponsor ownership. E-commerce platform THG [LON:THG], mobile towers operator IHS [NYSE:IHS] and shoe-maker Dr Martens [LON:DOC] are among the worst performers since their respective IPOs.

Predictive analytics by The Morning Flash identified Nexi as a potential takeover target four months ago, in June. CVC was also flagged as a potential bidder. 

Shares in Nexi jumped 13% yesterday (18 October) to close at EUR 6.51 after a report CVC had contacted Italian state-owned investment vehicle Cassa Depositi e Prestiti (CdP), which owns a 14% stake in Nexi, about acquiring the business. Even after yesterday’s gains, Nexi is trading at a 27% discount to its EUR 9 per share IPO price. Nexi was also trading at a discount to the 16x EBITDA multiple at which Brookfield pitched its GBP 2.4bn (EUR 2.7bn) enterprise value bid for peer Network International [LON:NETW]. 

Network International itself was listed in 2019 at 435 pence per share and is being delisted at 400 pence after an initial bid from CVC and Francisco Partners at 387 pence. 

Predictive analytics by The Morning Flash identified Network International as a potential takeover target when it was trading at around 300 pence per share in October 2022, six months before it received initial takeover interest. 

Other underwater IPO companies which have recently become bid targets include Sweden-headquartered biotech research platform Olink [NYSE:OLK], London-headquartered legal services provider DWF Group [LON:DWF], testing, inspection and certification compliance (TICC) specialist Synlab [ETR:SYAB], and software provider SUSE [ETR:SUSE]. 

Olink is subject to a USD 26 per share offer worth USD 3.1bn (EUR 3bn) from Thermo Fisher [NYSE:TOM], a 30% premium to its IPO price of USD 20. But the stock had been trading at USD 14.97 prior to Thermo Fisher’s bid.  

DWF is being acquired by financial sponsor Inflexion at 100 pence per share in a deal which values the target at GBP 516m including debt. DWF listed in 2019 at 122 pence.  

Synlab received a EUR 10 per share offer in September from financial sponsor Cinven – its largest shareholder and pre-IPO owner – which valued the business at EUR 3.6bn including debt. Cinven listed the TICC business in 2021 at EUR 18 per share.  

And financial sponsor EQT completed a tender offer for SUSE earlier this month as an initial step in its pursuit of a delisting of the asset. SUSE shareholders were offered EUR 16 per share in a deal which valued the business at an enterprise value of EUR 3.3bn. SUSE was listed by EQT in 2021 at EUR 30 per share.  

The underwater IPO universe has already represented a rich stream of deal flow for financial sponsors and dealmakers struggling to make valuations work elsewhere in a choppy and volatile financing environment. There are still plenty more potential targets to go after. 

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