Evonik chooses unorthodox route to come to market

When the giant German chemicals company Evonik first announced its intention to float, most of the world’s major investment banks unsurprisingly expressed an interest in working on the deal.

Indeed, so keen was Goldman Sachs to be involved, for example, that its chief executive Lloyd Blankfein went to one of the earliest pitches of the process, and his bank succeeded in getting taken on board.

Yesterday, shares in Evonik traded for the first time, valuing the group at around €15bn, as it successfully completed the largest public German listing since 2007.

In Goldman Sachs’ place, however, was an equity brokerage and advisory group called MainFirst and Deutsche Bank, who worked alongside Goldman on the attempt to take Evonik to market last year. Deutsche has a lending relationship with Evonik.

Bankers say that MainFirst was brought in to the deal to replace Goldman Sachs when it became clear that the company was going to take an unorthodox route to market, and one that didn’t require the huge distribution expertise of more than one global investment bank.

The plan chosen appears to have been inspired by the private equity group, CVC Capital Partners.

CVC owned around 25 per cent of the company.

Using its experience in the run-up to the Formula 1 float, CVC suggested there should be a series of pre-listing placements, starting with a two per cent sale of shares in the group in February.

“The people who bought the shares in February did so because they liked the company. It was a conviction rather than momentum investment,” said one banker close to the deal.

It was also an investment sold significantly cheaper to buyers, by around 15 per cent, than if they had waited until the blast-off time associated with a more conventional initial public offering (IPO).

There were further placements ahead of the full listing yesterday of around another 12 per cent from CVC along with the majority shareholder RAG.

One banker said yesterday: “It was a fantastic solution. We got out of the rigid processes normally associated with an IPO.”

Others pointed out that the previous attempts to bring Evonik to market, which failed through a mixture of market volatility and an unbridgeable gap in pricing expectations between the selling shareholders and buyers, had helped to educate the investor base to make pre-placements more viable.

“There were 15 research reports out there and therefore the name’s very visible,” said one banker, suggesting the Evonik route to market might not suit everybody.

Nevertheless, a significant hurdle has been overcome in the European IPO markets and if my lunch in the week with two City-based bankers is anything to go by, there are M&A deals as well as further IPOs to keep the pulses racing.

The biggest problem they have, they say, is finding enough people to take on the work after a series of redundancies.

david.hellier@cityam.com

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