October 8, 2018 / 1:56 PM / 11 days ago

Knorr-Bremse accelerates IPO as other listings languish

MUNICH/FRANKFURT (Reuters) - German brake systems maker Knorr-Bremse said on Monday it was accelerating its initial public offering thanks to strong investor demand, bucking weakness in other recent floats and a gathering selloff on stock markets.

Bankers and investors said the float was well supported because family-owned Knorr is viewed as an industry leader with a history of consistent profitability, differentiating it from other recent debutantes that are trading below their offer price.

“The capital market sees Knorr-Bremse as a quality company that has always delivered on its margins,” said a source at one large German fund manager who requested anonymity.

“On the other hand, stock markets are quite weak at the moment. This is not a bargain.”

Chief Executive Klaus Deller said Knorr-Bremse would close the offering on Wednesday, a day earlier than expected, thanks to “the great interest investors have shown during the roadshow and the bookbuilding process”.

That upbeat sentiment contrasted with deepening weakness on stock markets that have been rattled by rising U.S. Treasury yields — reflecting a view that the world’s largest economy is running hot and that the Federal Reserve may have to raise interest rates faster than expected in response.

Rising bond yields make stocks relatively less attractive to hold for investors.

Germany's DAX index .GDAXI dipped below the 12,000 mark on Monday before recovering to stand 0.7 percent down on the day at 12,023 points. The index of 30 leading shares stocks has lost 7 percent in the year to date.

BIGGEST DEAL

The Knorr-Bremse offering, which could raise up to 4.21 billion euros ($4.84 billion), is easily the largest in Germany this year. Owner Heinz Hermann Thiele and his family are selling a 30 percent stake.

The price range has been set at 72 to 87 euros per share, reflecting a potential valuation of 11.6 to 14 billion euros for the maker of brake systems for trains and commercial vehicles. The banks handling the transaction said order books were already covered a week ago.

One source in the consortium managing the Knorr offering said that market nerves had contributed to Monday’s decision to shorten the IPO offer period.

At the same time, this person noted that the market float of Westwing (WEW.F), an online furniture retailer, had been oversubscribed several times.

The Westwing placement is expected to be priced on Monday in the middle of its initial offer range, at 26 euros a share, according to another source.

In other recent deals, shares Aston Martin (AML.L) are trading 15 percent below last week’s float that valued the UK sports car maker at $5.6 billion, while British peer-to-peer lender Funding Circle (FCH.L) has shed a quarter from the price at which it was marketed to investors.

German chip factory builder Exyte shelved plans to float in Frankfurt this month after getting muted feedback from investors, becoming the latest aspiring public company to face listing difficulties.

Listing and trading of Knorr-Bremse shares on the regulated market of the Frankfurt Stock Exchange is still planned for Oct. 12, with settlement and completion of the IPO due on Oct. 16.

Deutsche Bank, JP Morgan and Morgan Stanley are acting as joint global coordinators and bookrunners on the deal. In addition, Berenberg, Gossler, Commerzbank, UBS and UniCredit are joint bookrunners.

($1 = 0.8690 euros)

Reporting by Douglas Busvine; Editing by Keith Weir

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