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Bloomberg
Equity capital markets bankers won’t be sad to close the door on a miserable 2019 in Europe. Though some of the elements that made for a volatile environment for initial public offerings are still in play, there is reason to hope 2020 will bring fairer weather.
Trade tensions have eased after a deal between the US and China this month, and the UK’s path out of the European Union became clearer when the Conservative Party won a resounding majority in the general election.
Nevertheless, slowing global growth, the abundance of cheap debt and a profusion of private capital looking for attractive assets continue to put a damper on European IPOs. The regulatory burden and cost of a public listing are less attractive when so much alternative funding is available.
“I’m not expecting a great big rush of transactions in 2020, but there is still scope of high-quality businesses to come to market,†said David Clark, an investment manager at Saracen Fund Managers. Firms will continue to list for the wider access to capital and the higher profile, while an IPO is still a viable route for private companies to test their valuations, he said.
Europe has been hit for years by de-equitisation, where public markets shrink as not enough new shares are sold to offset buybacks, mergers and take-private transactions. Yet, public markets still have an important role to play in providing much-needed liquidity, investor protections and secure trading platforms, said James Roe, ECM partner at Allen & Overy.
The drop in London listings is a “short-term impact of Brexit,†and once the uncertainty lifts, it will return to more normal levels of activity, Roe said.
1. Wintershall DEA
A listing for one of Europe’s largest independent oil-and-gas exploration and production businesses has been in the works for some time. Its co-owners, German chemicals giant BASF SE and Mikhail Fridman-controlled investor LetterOne, selected advisers months ago to prepare for an IPO, and the company says it will ready by summer 2020. Wintershall DEA could be valued at more than $20 billion, making it one of the largest floats in the industry in Europe since Rosneft’s $11 billion offering in 2006.
2. Syngenta
It seems like only yesterday that ChemChina closed its $43 billion acquisition of Swiss pesticide business Syngenta, but it’s now been two years since completion. While the original goal was to re-list Syngenta in Switzerland by 2022, Chief Executive Officer Erik Fyrwald has said the company is working with several banks to be ready for an IPO as soon as next year.
Previously listed in Zurich and New York, the firm will stick with a domestic float, while it is also considering a secondary quotation in China, Hong Kong, London or New York, the CEO said. Syngenta could well be the chemical industry’s largest ever listing.
3. Orange Africa
France’s largest mobile phone provider, Orange SA, is planning an initial share sale of its Africa and Middle East unit that could kick off as soon as next year. The company is “technically ready†for the IPO and has mandated advisers.
Paris and London are under consideration for the listing venue. The unit could be worth close to 13 billion euros ($14.4 billion), according to Bloomberg Intelligence.
Orange Africa isn’t the only big telecommunications listing in the pipeline for next year. Deutsche Telekom AG reportedly is weighing several disposals in 2020, including a sale or IPO of T-Mobile Netherlands.