BERLIN (Reuters) - German national rail operator Deutsche Bahn AG [DBN.UL] said it was going ahead with what is set to be the country’s biggest initial public offering (IPO) in eight years despite turmoil on global financial markets.
Deutsche Bahn on Friday set Oct. 27 as the first day of trading for shares in its DB Mobility Logistics unit, Germany’s passenger transport, logistics and service business.
The global market for IPOs collapsed in the third quarter of this year in its worst performance since early 2003, according to Thomson Reuters data, with Europe and the United States leading the decline.
Earlier this week, Russian Railways (RZhD) announced it was delaying until at least 2011 IPOs of two subsidiaries that were planned for this year, due to poor market conditions.
But Deutsche Bahn Chief Executive Hartmut Mehdorn said he was upbeat about the DB sale, which is expected to be the country’s biggest since the sale of Deutsche Post AG (DPWGn.DE) in November 2000.
“Despite the tense situation on international financial markets, we are going into the last phase of the IPO and have received a good deal of positive feedback from our discussions with investors so far,” Mehdorn said in a statement.
Shares representing 24.9 percent of the Bahn unit will be offered to private and institutional investors inside Germany as well as to institutional investors abroad through a private placement, Deutsche Bahn said.
Europe’s biggest rail company also plans to hold a public offering without listing in Japan. No stock will be offered in the United States.
Deutsche Bahn said it would start a two-week international roadshow on Oct. 13 to present its plan to institutional investors.
Two sources familiar with the IPO plans told Reuters on Friday a price under 5 billion euros was likely.
Analysts once estimated the privatisation could bring in as much as 8 billion euros ($11.7 billion), but recent forecasts about the likely proceeds have been more reserved as convulsions on world markets force more and more firms to scrap IPOs.
The benchmark DAX .GDAXI index of German shares is down more than 6 percent in September alone and only two small German firms -- special coatings company Ropal RO5G.DE and online pet shop Zooplus (ZO1G.DE) -- have braved the IPO market this year.
The Financial Times Deutschland reported, without citing its sources, that the Bahn listing was now expected to bring in between 4.7 billion and 5.3 billion euros.
Pressed repeatedly at a news conference, government spokesman Thomas Steg said Berlin saw no reason to delay the IPO, which has been under discussion for years but was repeatedly postponed due to political wrangling.
In a research note published on Thursday, ING analyst Axel Funhoff said Deutsche Bahn’s industry positioning was good, particularly with regard to rail freight, which could profit from high oil prices. He cited Bahn’s passenger traffic as a good defensive business.
A trader at a German bank, who requested anonymity, said the timing of the listing was “not ideal” but predicted this would not get in the way of a sale that has been in the works for so long and where price is not the top priority.
“This is a highly political matter. The preparations were so difficult that they have to get it done now,” the trader said. Keep in mind that there is a federal election next year.”
Thomson Reuters data shows there were only 86 IPOs worldwide in the third quarter of 2008, raising a total of $8.7 billion. That compares with 151 deals worth $35.4 billion in the prior quarter.
In Europe, IPO proceeds fell to $1.4 billion in the quarter. Eight of the 10 biggest global IPOs this year have been in emerging markets.
Additional reporting by Dave Graham, Paul Carrel and Kirsti Knolle; Writing by Noah Barkin; Editing by Quentin Bryar