The owners of German chemical company Evonik scrapped plans on Monday 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 recovered.
“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.
A string of share flotations across the globe have been blown off course by the volatility of financial markets in recent months, arising from fears the euro zone debt crisis will drag down global economic growth.
Earlier this month, motor sport racing company Formula One delayed a Singapore IPO worth up to $3-billion (U.S.), and investors also have been shaken by social networking site Facebook Inc.’s recent IPO, which was marred by technical issues and over-ambitious pricing.
Sources had told Reuters on Sunday already 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.
“Evonik is still in excellent shape. But a stock market listing can only be considered when the financial market situation permits sufficient proceeds,” RAG said on Monday.
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 ($18.9-billion U.S.) in an IPO, after subtracting €1-billion 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 per cent, which investors have made clear is more than they are willing to pay.
RAG, which owns 75 per cent of Evonik, and private equity firm CVC, which holds the remaining 25 per cent, had planned to float about 30 per cent of Evonik. Deutsche Bank and Goldman Sachs led the IPO preparations.