Back To All

Bloomberg: In Europe, the Only Listings in Town Are Spinoffs: ECM Watch

(Bloomberg) — With mounting worries over the economic impact of the coronavirus keeping equity markets in flux, spinoffs are now the only floats making it to the finish line in Europe.

While a number of planned offerings have been pulled amid the stock market meltdown of the past four weeks, several conglomerates are forging ahead with carve-outs to focus their attention on core businesses.

Spinoffs worth $3.5 billion have been listed in Europe this year, according to data compiled by Bloomberg. That’s nearly nine times the $424 million floated during the same period in 2019, when a steep market pull-back at the end of 2018 had all but brought ECM activity to a standstill.

Yet, this time around demergers have continued to come to market, with three of this year’s five spinoffs taking place in March. The only deal to raise fresh capital, BW Offshore Ltd.’s exploration and production unit BW Energy Ltd., happened before the stock market rout began mid-February.

While Investec Plc was looking to raise as much as 226 million pounds ($261 million) in the carve-out of its asset-management arm Ninety One Plc, the bank decided in the end to scrap the initial public offering, but pushed ahead with the spinoff.

This strategy paid off, with Ninety One shares rising 12% on their first day of trading, as investors welcomed the listing as a cheap bargain.

Electrolux AB pursued a similar strategy when it pressed on with the spinoff of its food-service equipment businessElectrolux Professional AB, days after warning of a slump in demand and disruptions in the supply chain as a result of the coronavirus outbreak.

The new firm, which started trading on Monday, initially fell as much as 16%, before erasing losses to trade up as much as 19%, and falling back again, down 1.1% at 5:06 p.m. in Stockholm, outperforming a 4.1% drop in the Stoxx Europe 600.

Spinoffs are trading well in defiance of the broader market meltdown with investors taking “comfort from the fact that a strong potential for growth is preserved after the share distribution,” said Josef Schuster, the founder of Chicago-based IPO firm Ipox Schuster LLC.

But not all companies are willing to brave the choppy market. Swedish Qliro Group AB, which has been planning the listing of its financial services unit Qliro AB on Nasdaq Stockholm in the first half of the year, said on Friday it would postpone the new share issue “until further notice.”

By Swetha Gopinath, Bloomberg