French construction materials maker Saint-Gobain has postponed indefinitely the initial public offering of glass container unit Verallia, the most recent sign of weak demand for European stock flotati…
French construction materials maker Saint-Gobain has postponed indefinitely the initial public offering of glass container unit Verallia, the most recent sign of weak demand for European stock flotations. Saint-Gobain, which had hoped to raise up to EUR 958 million from the spin-off, spoke about an “underlying level of market uncertainty and volatility.” The decision to pull the IPO is a defeat for Saint-Gobain, for which the withdrawal is the latest in a series of failed attempts to sell or spin off the unit, as well as a setback for the European IPO market. More than 15 European IPO deals have been pulled this year and many which have managed to float their shares have seen poor aftermarket performance, leading jaded investors to demand greater discounts to take part in new offerings. Dutch firm Agendia, which markets breast cancer tests, also postponed its IPO on 20 June. A source close to the Verallia deal said earlier that the books on the offering had not been covered when they closed, often a sign that an IPO will have to be withdrawn or repriced. Those close to the deal have said a cut in profit outlook by Verallia“s main listed peer Owens-Illinois Inc. had had an adverse effect on investors considering taking part. The profit warning sent shares in the world“s largest glass bottle maker down 6%. In addition, investors grew increasingly risk-adverse after delays on a final agreement on a Greek bailout, sending European stock indexes lower and volatility indexes higher. One banker, speaking not for attribution said the Verallia failure was likely to have a chilling effect on any other companies contemplating an IPO in the short-term. “People are going to take a vacation,” he said. Earlier, sources said that Saint-Gobain – which had aimed to sell-off the unit to focus on its home and construction products – had received enough orders for 90% of the shares it was offering. Saint-Gobain, had set an indicative price range of EUR 29.50-36.00 per share for the Paris listing of a 40% stake in Verallia. The failure to get enough investor interest is notable since Verallia had been priced to sell – at 9-17% discount to Owens-Illinois in terms of 2011 EV/EBITDA (enterprise value/earnings before interest, tax, depreciation and amortization). Saint-Gobain, which has a market cap of EUR 22 billion, insisted in the statement announcing the IPOs postponement that Verallia“s outlook was “favourable.” The move to pull the IPO will likely be bad news for Irish bottler and packaging maker Ardagh Group, which plans to list in the US as early as the third quarter of this year.