Hochtief Shelves Toll-Unit Unit IPO, Casting Doubt on Recovery
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Benedikt Kammel, Nicholas Comfort and Elisa Martinuzzi
Dec. 4 (Bloomberg) -- Hochtief Concessions, which failed to lure buyers to what would have been Germany’s largest initial public offering in two years, is casting doubt on whether investors will back a nascent recovery in European IPOs.
Hochtief AG, Germany’s largest builder, had sought to sell as much as 49 percent of the unit that runs toll roads and airports to raise as much as 1 billion euros ($1.5 billion). The Essen, Germany-based company shelved the offering yesterday, citing the debt crisis in Dubai and “resulting disturbances in the international capital markets.”
European share sales were rebounding from a two-year slump just as Dubai’s move to delay debt repayments sparked the biggest jump in stock-price swings since 2008. Private-equity firms are counting on share sales to let them return cash to investors by selling investments, while companies from France’s PPR SA to British insurer Aviva Plc are turning to the equity market to sell units, boost capital, or finance expansion.
“The IPO market in Europe is still limited to certain companies and certain industries,” Julie Teigland, a Frankfurt- based partner at Ernst & Young, said in an interview. “It’s so early we can’t speak of a recovery just yet. We’ll see a window opening up in the first or second quarter of next year, but it won’t be for everyone.”
The pace of IPOs has taken longer to recover in Europe than in the U.S. after New York-based Lehman Brothers Holdings Inc.’s collapse in September 2008 spurred a credit-market freeze. Nine western European companies have raised money in offerings in the region since the start of this year, compared with 42 in America, data compiled by Bloomberg show.
‘Out of the Question’
Hochtief had sought to sell the shares for 24 euros to 29 euros each. The builder said it won’t pursue the sale “for the time being” and that a cut-price sale is “out of the question.”
The decision to put the listing on hold came a week after Dubai World, the investment company burdened by $59 billion of liabilities, roiled equity markets by seeking to delay repayment of debt. The VStoxx Index, which gauges the cost of using options to protect against declines in the Dow Jones Euro Stoxx 50 Index, jumped 28 percent on Nov. 26, the biggest surge since October 2008.
Hochtief’s Mannheim-based rival Bilfinger Berger AG said today that it will determine early next year whether to go ahead with an IPO of its Australian subsidiary. K+S AG, the Kassel, Germany-based potash supplier that is in the process of raising as much as 686.4 million euros in a rights offer, today said the offer is proceeding as planned.
Positive Feedback
Scan Energy said it’s moving ahead with plans to sell shares after receiving “positive” feedback from investors. The company has set an “attractive” price range and isn’t comparable to Hochtief Concessions, Scan Energy said in an e- mailed statement.
Hochtief isn’t “a sign that you can’t hold IPOs,” said Ingbert Faust, an analyst at Equinet AG in Frankfurt. “The conditions have to be right, and what price you take it to the market has to be right. 2010 will be a new start.”
Other offerings scheduled in Germany include Brenntag Holding GmbH, a chemicals distributor owned by private-equity firm BC Partners Ltd., and Flint Group, the world’s second- biggest maker of printing ink, people familiar with the plans have said. Siemens AG said this week it may list a computer services unit after changing the legal structure of the division.
Gartmore Group
Private-equity firms are also returning after a freeze in deals following the worst financial crisis since the Great Depression.
Gartmore Group Ltd., the London-based money manager owned by leveraged buyout firm Hellman & Friedman LLC, plans to raise more than 400 million pounds ($660 million) in an IPO. San Francisco-based Hellman & Friedman, which acquired Gartmore for about 500 million pounds in 2006, may sell part of its 52 percent stake in the transaction.
Hochtief shelved its offering following a day in which CFAO SA, the African distributor spun off from Paris-based PPR, and Bologna, Italy-based fashion retailer Yoox SpA climbed in their trading debuts.
CFAO added 4 percent in Paris yesterday after its 806 million-euro IPO, France’s biggest since 2007. Yoox advanced 8.4 percent in Milan after selling 104.5 million euros of shares in Italy’s largest sale in two years. CFAO’s offering wasn’t derailed by the Dubai debt crisis, the company’s chief executive officer, Richard Bielle, said in an interview.
Middle East
Hochtief had said on Nov. 27 that it expected no material impact from Dubai’s attempt to delay debt repayments. The company operates in the Middle East partly through its Leighton Holdings Ltd. subsidiary. Leighton scrapped a 4.9 billion dirham ($1.3 billion) venture to build an additional concourse at Dubai airport in April after failing to reach an agreement with Dubai’s Department of Civil Aviation.
The construction company first said in August that it was considering an IPO for the unit, and aimed to raise between 882 million euros and 1 billion euros. Hochtief Concessions unit would also raise about 600 million euros itself in the sale.
The concessions division has stakes in airports in Sydney, Athens and four other cities, as well as toll roads in Greece and Chile. It operates tunnels, and schools in Germany and Scotland. Hochtief Concessions had assets with net present value of 1.54 billion euros as of June 30, and the unit had net income of 63.9 million euros last year.
‘No Pressure’
“Our claim has always been not to sell in any case for less than our target value,” CEO Herbert Luetkestratkoetter said in a statement. “We have always said so and continue to be under no pressure.”
Hochtief shares added 1 percent to 52.37 euros at 2:15 p.m. in Frankfurt, after falling as much as 2.4 percent earlier.
While share sales in the U.S. have outpaced Europe, four American companies have shelved offerings since Oct. 29. HealthPort Inc., the Alpharetta, Georgia-based developer of software used to manage medical records electronically, was the latest to postpone its IPO on Nov. 19.
To contact the reporter on this story: Benedikt Kammel in Berlin at bkammel@bloomberg.net; Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net; Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net.
Last Updated: December 4, 2009 08:17 EST
