Evonik Industries AG, Europe’s biggest unlisted specialty chemical maker, said it plans to make its debut on Frankfurt’s bourse in coming weeks, shrugging off “challenging conditions” on financial markets.
The planned initial public offering by owners RAG-Stiftung and CVC Capital Partners is the “logical next step” for the Essen, Germany-based company after generating “sustained” value for its owners, said Steve Koltes, a partner at private equity firm CVC, which owns 25 percent of Evonik.
RAG, which oversees Germany’s coal-mining industry, and CVC are attempting the nation’s biggest IPO in more than a decade in the midst of Europe’s debt crisis. Evonik will benefit from incumbent chemical stock BASF SE (BAS), which has gained the top weighting in the DAX benchmark index. The maker of additives for plastics, glass and cosmetics has a bigger proportion of its products supplying consumer goods and other higher-margin items, making its earnings less susceptible to the demand swings of commodity chemicals than BASF.
“The listing creates a new rival with an allocation battle for the money and the attention of investors,” said Oliver Schwarz, an analyst at MM Warburg. “Investors have a certain amount of money available and probably only want to put a limited amount in the chemical sector. Now BASF will have to tussle with another listed company.”
Evonik Chief Executive Officer Klaus Engel said he’s approaching the forthcoming transaction with “great confidence.” Evonik’s adjusted earnings before interest, taxes, depreciation and amortization this year may top the 2.8 billion euros ($3.5 billion) reported in 2011, and sales are expected to be slightly higher than last year’s 14.5 billion euros, according to a statement.
“Despite the challenging conditions on the financial markets, we are entering the intensive phase of preparations,” Engel said in the statement. “A stock exchange listing will make Evonik even more attractive.”
The company had twice attempted to list its shares since 2007, and Evonik pulled back each time as market conditions deteriorated.
RAG and CVC will be selling shares at a ratio of 2 to 1, they said. Private and institutional investors in Germany and Luxembourg will be offered a stake in the company, and funds outside those countries will have the option of taking up private placements, according to the statement.
While Evonik is a candidate to join Germany’s benchmark DAX Index, the maker of specialty plastics and cosmetic ingredients may first list in the mid-cap MDAX index because of its initial smaller free float, Schwarz said. The company is seeking to raise 3.5 billion euros to 4.5 billion euros, Reuters reported yesterday.
Evonik has refocused on chemicals with emphasis on health, nutrition and resource efficiency, after selling majority stakes in its real-estate and energy divisions.
“Evonik is perhaps more attractive than BASF because it doesn’t have oil, gas trading or agro chemicals,” said Peter Spengler, an analyst at DZ Bank AG. “It comes down to whether investors think they can make money.” Spengler, who recommends buying BASF stock, said while he can’t comment on Evonik’s valuation, the company will benefit from shedding its real- estate and energy assets.
Deutsche Bank AG (DBK) and Goldman Sachs Group (GS:US) are acting as global coordinators and joint bookrunners, assisted by Bank of America (BAC:US) Merrill Lynch, Credit Suisse Group AG (CSGN) and JPMorgan Chase & Co. (JPM:US) Lilja & Co. is an adviser to RAG and CVC.
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