France’s initial public offerings market may rebound from a three-year slump, rekindling Cie. de Saint-Gobain (SGO) SA and Lagardere SCA’s plans to sell shares in their units, bankers at the country’s largest lenders said.
French IPOs raised 239 million euros ($306 million) this year, a quarter of the amount raised in 2009 and a far cry from the 14.1 billion-euro peak in 2005, data compiled by Bloomberg show. The number of issues slid to 11 this year from 16 in 2011 as the three-year-old European sovereign-debt crisis rattled financial markets. Globally, IPOs raised $117 billion, little changed from $122 billion in 2009.
Bankers, including Thierry Olive of BNP Paribas SA (BNP) in Paris, say there’s potential for a rebound in the French market as investors seek new opportunities. Saint-Gobain pulled the IPO of its Verallia packaging unit in 2011, while Lagardere canceled its stake sale in pay-television channel Canal Plus France.
“We can have a return of the Verallia and Canal Plus operations,” said Olive, global head of equity capital markets at BNP Paribas, which was among the lead managers for the Verallia sale before Saint-Gobain shelved it. “Investors want to buy a dream. Verallia is the type of company that offers resilience in an economic rebound.”
The European Commission predicted this month that France’s gross domestic product will expand 0.4 percent in 2013 after 0.2 percent growth this year.
French IPOs may also be spurred by successful sales in neighboring Germany, said Jean-Michel Berling, global head of equity capital markets at Credit Agricole CIB in Paris.
“Issues such as Canal Plus and Verallia could resurface,” he said in an interview. “Some large IPOs in countries such as Germany have recently done well so we can hope that will inspire others.”
Telefonica Deutschland Holding AG, the German unit of Spain’s biggest phone company, climbed in its trading debut on Oct. 30 after completing Europe’s biggest IPO this year. The shares rose 3.6 percent to 5.80 euros in Frankfurt, valuing the Munich-based carrier at 6.5 billion euros.
The Stoxx Europe 600 (SXXP) declined 11 percent last year as the region struggled to contain the debt crisis. The index rebounded 15 percent from this year’s low on June 4 as European Central Bank President Mario Draghi said he would do everything to protect the single currency and the Federal Reserve opted for a third round of asset purchases.
France’s benchmark CAC 40 Index (CAC) has advanced 9.6 percent this year after falling 17 percent in 2011. The gauge slipped 0.3 percent to 3,452.47 at 9:10 a.m. in Paris today.
Societe Generale SA (GLE) is heading for its third consecutive year as biggest underwriter of French equity and equity linked deals with 18 issues worth 1.56 billion euros, according to data compiled by Bloomberg. BNP Paribas holds the third spot with 869.3 million euros and Credit Agricole is in ninth position with 257 million euros in deals, the data show.
Of the equity deals on which Societe Generale worked, only four were IPOs. They were all in the health-care field, with values of less than 41 million euros each.
“SocGen has a strong franchise and track record in delivering these companies to market and following them post IPO, so we know the investors that are interested in this space,” Luis Vaz-Pinto, global head of equity capital markets at Societe Generale in Paris, said in a phone interview. “It’s a sweet spot for us.”
The bank’s largest deal this year was a 327 million-euro sale of additional shares for Eutelsat Communications SA (ETL) on Jan. 13, Bloomberg data show.
Larger IPOs in less specialized industries have been scarce, with investors and issuers favoring accelerated operations that can be completed between market swings, according to Vaz-Pinto.
“Blocks and convertibles take a day to place and can be structured quickly,” Vaz-Pinto said.
To be sure, the economic turmoil in the euro area may extend that trend as it roils markets and caps equity capital markets, or ECM, operations, said Credit Agricole (ACA)’s Berling. Moody’s Investors Service followed Standard & Poor’s in stripping France of its top credit rating Nov. 19, citing a worsening growth outlook for Europe’s second-largest economy.
“For more developments in ECM activity, we have to see less volatility in the market,” Berling said. “As long as there is uncertainty, we can only do rapid operations that limit the scope of ECM business. IPOs are the backbone of our activity. When they dry up, there are fewer needs for financing that follow, so it is a vicious cycle.”
Work involved for “an IPO in France takes about seven weeks, plus the additional preparation time,” Vaz-Pinto said. “As we have seen in this past year, there are very few periods of seven weeks of stability.”
Still, there’s a “lot of pent up demand and that should bode well for 2013,” he said.
Saint-Gobain in June said it will resume the sale of a minority stake in Verallia once markets calm down. Sophie Chevallon, a Saint-Gobain spokeswoman, said the group has no timetable for the sale. Verallia, which makes bottles and jars, had been seeking to raise at least 785 million euros. Lagardere (MMB) in February said an IPO of Canal Plus France (AN) remains the main scenario for the unit. It didn’t return calls seeking comment.
French banks say they are optimistic there’ll be an improvement in the nation’s IPO market. BNP’s Olive said that even concerns about the debt crisis may not damp activity.
“There has been market pressure on Italy and Spain,” Olive said. “Regarding France, companies that have international business, such as Verallia, will be able to issue shares.”
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