©Reuters. A logo of skin care company Galderma is pictured at the company’s offices in Lausanne, Switzerland, March 13, 2024. REUTERS/Denis Balibouse/File Photo
By Pablo Mayo Cerqueiro and Emma-Victoria Farr
LONDON/FRANKFURT (Reuters) – Swiss skincare company Galderma’s strong debut on Friday is calming nerves on Europe’s IPO market, in the wake of German retailer Douglas’s poorly received stock market flotation, according to bankers.
Galderma’s debut on the Zurich Stock Exchange marked the largest IPO in Europe since Porsche in September 2022.
Its long-awaited listing comes as European companies worth billions of dollars prepare to go public.
Those hopes were in danger of being dashed after shares in Douglas, owned by CVC, fell more than 12%.
However, Galderma shares rose above their issue price in the first hours of trading, while overnight in New York social media company Reddit saw its shares jump more than 48%.
“Sentiment around IPOs continues to be positive globally and in Europe, and deals in the pipeline for the second quarter and second half are expected to happen as planned,” said Antoine de Guillenchmidt, co-head of markets of equity capital at Goldman Sachs for Europe, Middle East and Africa, who worked on the IPOs of Galderma and Douglas.
Trading at these two private equity firms has been closely monitored by bankers and investors, after global IPO issuance fell in 2023 for a second year.
As mergers and acquisitions volumes hit decade lows, pressure has increased on buyout funds to sell companies, return money to investors and deploy newly raised cash.
UNSOLD GOODS
Private equity firms were left with a staggering $3.2 trillion in unsold assets, limiting the return of capital to their investors and having a chilling effect on fundraising, Bain & Co analysts said.
But with central banks signaling an end to interest rate hikes, the stock market is becoming a viable way out.
“Large private equity-backed transactions are a sign that IPO markets are receptive,” said Markus Meier, head of ECM in Germany at Bank of America.
Europe has already seen some success stories this year.
Tank equipment maker Renk, the first newcomer to the Frankfurt Stock Exchange this year, has almost doubled its issue price of 15 euros since its debut in February. Its IPO was one of many postponed last fall due to interest rate uncertainty and geopolitical tensions.
After Renk’s debut, Douglas and Galderma both accelerated their IPOs to take advantage of the positive sentiment.
Douglas, owned by CVC, raised 850 million euros ($920 million) to repay debt. The shares were priced at 26 euros, the minimum of the indicated price range, and were trading from 22.7 euros.
EQT-backed Galderma has raised around 2 billion Swiss francs ($2.23 billion), with its shares opening at 61 francs on the SIX Swiss Exchange, up 15% from its final IPO price of 53 francs per share, which was the high end of its indicated price range.
ATTENTION AHEAD
To be sure, Douglas will have left a bad taste in the mouths of those investors who lost money and could pose a stumbling block for some IPO candidates.
“We are still in the recovery phase, so we are not in an anything goes environment, but in a selective environment,” said Martin Thorneycroft, head of cash ECM in EMEA at Morgan Stanley, who co-led the IPO of Galderma.
While caution remains, further new issues can be expected, said Julian Schulze De la Cruz, a capital markets lawyer at Noerr.
Private equity firm Permira prepared an IPO for Italian luxury brand Golden Goose – known for its worn-looking sneakers – in the second quarter. Apollo-backed lender OLB Bank also said it is preparing to go public.
Fuel card provider DKV Mobility – another in CVC’s portfolio after Douglas – is also waiting to return after postponing its IPO plans last year.
CVC itself is expected to come to market with an IPO worth more than 1 billion euros as soon as after Easter, a person familiar with the plan said.
($1 = 0.8987 Swiss francs)
($1 = 0.9241 euros)