Bloomberg News

Deutsche Bank Leads French Market With Nomura as Stock Sales Ebb

July 01, 2011

July 1 (Bloomberg) -- Deutsche Bank AG, JPMorgan Chase & Co. and Nomura Holdings Inc. were catapulted to top equity underwriters in France this year, the first time they’ve headed the list in at least 12 years, thanks to one deal.

In the year’s largest stock transaction in France, the three banks helped sell about 1.15 billion euros ($1.66 billion) of Legrand SA shares for private equity firms Kohlberg Kravis Roberts & Co. and Paris-based Wendel.

The outlook for stock sales is gloomy as investors are spooked by the Greek debt crisis and a rash of French sales completed in 2009 leaves few deals ready to be brought to the market. Two French initial public offerings were canceled this year by companies citing poor market conditions.

“Investors are sitting on their hands and don’t really want to get involved in the market right now,” said Sylvie Sauton, head of equity capital markets for France at JPMorgan in London. “A lot of IPOs haven’t performed well so investors have found it difficult to make money on the deals. It’s better for companies to wait and come back at a later stage.”

Deutsche Bank was No. 10 in the French market in first half of last year, while Nomura and JPMorgan didn’t rank among the top 18. Goldman Sachs Group Inc., which was the top underwriter of French equities in the first half in 2010, tumbled to the No. 11 spot, according to data compiled by Bloomberg. Goldman Sachs is still No. 1 for global and European equity sales this year.

Wilting Market

Companies raised 2.84 billion euros in share sales, equity- linked issues and rights offerings in France in the first six months, according to Bloomberg data. That compares with 24.8 billion euros in the first half of 2001 and 11.85 billion euros in the first half of 2009.

“There’s not a large enough number of candidates in France mature enough to do IPOs now,” said Valery Barrier, Paris-based managing director responsible for equity capital markets in France for Deutsche Bank. “Candidates are few and the market is volatile. IPO activity in France is nonexistent.”

The German market has fared better. The number of IPOs that were priced in Germany in the first half rose to 11 from five in the same period last year.

The Stoxx Europe 600 Index slid 7.2 percent from its high for this year on Feb. 17 as Japan’s earthquake caused the biggest nuclear accident since Chernobyl, U.S. economic data trailed forecasts and concern deepened that Greece may default on its debt. The index has fallen for the past eight weeks.

Canceled IPOs

The Bloomberg European IPO Index, which measures the performance of stocks during their first publicly traded year, has declined more than 30 percent in 2011 as Pandora A/S, a Danish jewelry maker, slid more than 50 percent and Flybe Group Plc, the U.K.’s biggest domestic airline, fell 42 percent.

There were 16 equity and equity-linked issues in France in the first half, down from 25 in the same period last year. The number of announced IPOs in France doubled in the first half to 14 over the same period last year, Bloomberg data show. The number of priced deals, however, fell to six.

Last month, Cie. de Saint-Gobain pulled its $1.1 billion IPO of its packaging unit Verallia and Lagardere SCA in March delayed the offering of its Canal Plus France stake. JPMorgan had been a bookrunner on both deals.

Saint Gobain, Europe’s biggest supplier of building materials, pulled its offering on June 20 because of market conditions. The move came five days after Verallia’s competitor Owens-Illinois Inc. cut its forecast for profit margins.

‘Distortion’

Lagardere, France’s largest publisher, postponed the sale of Canal Plus France shares in March. A month earlier, people with knowledge of the matter said the company may raise more than 1.35 billion euros from the IPO.

In the Legrand deal, Nomura, Deutsche Bank and JPMorgan sold shares through accelerated book building to institutional investors. The block trade gave each bank about 14 percent share of the market.

“There wasn’t one single big transaction last year, so there wasn’t the same distortion,” said Alasdair Warren, Goldman Sachs’s London-based head of ECM for Europe, the Middle East and Africa. “Most people look at the French and Benelux markets together, and Goldman was involved in two of the three largest deals this year.”

Goldman Sachs was the global coordinator on a 490 million- euro rights offer by Belgium’s Nyrstar and the main adviser on the 2.1 billion-euro spinoff of Luxembourg-based ArcelorMittal’s Aperam stainless-steel unit.

Market Outlook

Societe Generale SA had the next biggest piece of the pie in France after Deutsche Bank, JPMorgan and Nomura, with a market share of 10 percent and five equity and equity-linked transactions. The Paris-based bank was ranked second at the end of the first half last year and finished the year in the first position with 17 percent of the market and 15 issues.

“Our objective is to remain in our top spot position,” said Laurent Morel, global head of ECM at Societe Generale Corporate & Investment Banking in Paris. “The competition is intense, but I’m confident. We have a team dedicated to small and mid-cap deals in France, which helps us to keep a high level of activity in this domestic market.”

The top 17 underwriters for French sales have handled six equity-linked deals, seven offerings of additional shares and three IPOs so far this year, according to Bloomberg data.

The outlook for this year’s market will depend on the outcome of Greece’s sovereign debt crisis, the bankers said. The Greek government is trying to push through austerity measures that are critical to ensure the cash-strapped nation can tap loan payments from last year’s 110 billion-euro rescue.

“Things will be very quiet until September,” said Jerome Renard, managing director and co-head of the European equity capital markets team at Nomura in London. “The rest of the year will depend on the evolution of the macro environment and news flow over the summer.”

--Editors: Vidya Root, Andrew Rummer

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net.


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