DUESSELDORF, Germany (Reuters) - The owners of German chemical company Evonik RAGES.UL scrapped plans for what could have been Europe’s biggest initial public offering (IPO) in more than a year and said it would only resume efforts for a listing if markets recover.
A string of flotations across the globe have been blown off course by the volatility of financial markets in recent months, as investors steer clear of risky bets while the euro zone crisis casts a shadow over global growth prospects.
“Many big investors indicated their willingness to invest in Evonik in talks last week, but due to the high level of uncertainty in the markets, especially over the further development of the euro zone, the price that could be reached is far from a sufficient valuation of Evonik,” the RAG Foundation said in a statement on Monday.
RAG owns 75 percent of Evonik, which makes battery chemicals, animal feed additives, acrylic glass and super-absorbents for diapers. Private equity firm CVC CVC.UL holds the remaining 25 percent.
Sources had told Reuters on Sunday that RAG’s board of trustees was set to decide against an IPO, after a meeting with bankers on Friday showed insufficient commitments to the IPO from investors.
“The banks promised too much. Expectations were created that were too high,” said one investment banker who was involved in the IPO preparations.
RAG, a state-owned trust that will bear the liabilities of Germany’s wound-down coal mines, once hoped Evonik would be valued at 15 billion euros ($18.9 billion) in an IPO, after subtracting 1 billion euros in net debt, sources have said.
That valuation assumed a multiple of at least 6.5 times earnings before interest, tax, depreciation and amortization and an IPO discount of about 10 percent, but investors made clear the price was more than they were willing to pay.
The investment banker said demand would have been sufficient for proceeds of about 2 billion euros, less than half of the 4.5 billion that RAG’s targeted valuation would have fetched.
Earlier this month, motor sport racing company Formula One delayed a Singapore IPO worth up to $3 billion. Sentiment towards new issues was also undermined by social networking site Facebook’s (FB.O) recent IPO, which was marred by technical issues and over-ambitious pricing.
Growing jitters over Europe’s economy may also be dimming prospects for other IPOs that have been expected in Germany this year, such as the flotation of Rheinmetall’s (RHMG.DE) auto parts business KSPG and insurer Talanx HDIVGT.UL.
However in the more buoyant luxury goods sector, Italian notebook maker Moleskine said it had hired banks for an IPO.
RAG said it could only considering a fresh attempt at an IPO of Evonik once financial markets had recovered and allowed for higher proceeds.
Minority owner CVC also said its goal was still to list Evonik eventually, though it was not under any time pressure. CVC took its stake in Evonik in 2008 and said at the time it aimed for an IPO by 2013.
Additional reporting by Alexander Huebner; Writing by Maria Sheahan; Editing by David Holmes