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European IPO market set for huge turnaround: Barclays

A man walks past a branch of Barclays Bank in the City of London in this file photo.


Potential initial public offerings in Europe could raise as much as $200-billion (U.S.) over the next 18 months, a senior banker at Barclays Plc said on Thursday, as companies begin to return to the moribund flotations market.

Deals on this scale, supported by increasing interest in investing in Europe again, would represent a huge turnaround after months of inactivity brought on by choppy stock markets.

But the European market for new listings has started to show signs of life in recent weeks, with British insurer Direct Line and Germany's Talon among those whose shares have risen on stock market debuts.

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"It is so important that we have had a few successful deals that have traded well and made people money," Sam Dean, global co-head of equity capital markets (EMC), said on Thursday.

"We have identified something like $200-billion of potential IPO issuance over the next 18 months across a couple of hundred deals, so there is no lack of pipeline," he told an EMC conference hosted by International Financing Review, a Thomson Reuters publication.

Mr. Dean added that some of these would-be issuers are also looking at a merger or acquisition as an alternative route.

So far this year European companies have raised just under $9-billion from IPOs, according to Thomson Reuters data.

That compares with annual strike rates of more than $100-billion raised from stock market flotations in 2006 and 2007, before the financial crisis hit listing activity.

The market is still far from robust however, with bankers saying the gap in price expectations between buyers and sellers remains wide, and investors are still choosy over which companies they are willing to back.

"There are a lot of companies that would like to IPO," said Ken Brown, global head of EMC at Nomura. "I am positive on the likelihood of more transactions, the question is, is the market going to be there to support them?"

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Some recent deals, including the IPO of Russian bank Promsvyazbank, have failed to get off the ground.

But bankers at the conference said it felt like a tipping point had been reached, with investors seeing the valuation of European companies as increasingly attractive compared with the United States, and the deals which have worked well boosting confidence.

"There is growing appetite to look back at Europe … to shift back funds," said Luiz Vas Pinto, global head of EMC at Societe Generale. "We are starting to see that turnaround."

European government privatizations will be one of the catalysts of upcoming share sale activity, said Rupert Hume-Kendall, chairman of global corporate and investment banking at Merrill Lynch.

Several bankers predicted Germany and Britain would be among the busiest markets, as well as Russia, Poland and Turkey. Telecoms, a sector which has been a driver of sales this year, was also likely to see more activity, he said.

Dutch cable and telecoms company Zig has been one of the year's IPO success stories, seeing its shares rise some 35 per cent since its float in March.

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Europe's largest telecoms company Telefonica Europe Plc is in the process of listing its German subsidiary, while Russian mobile operator Megaton also plans to float before the end of the year.

Marc Leaver, head of European client coverage and business development at NYSE Euronext Inc., said some of its exchanges also expected several big deals next year.

"If things remain stable, as they have been for a few weeks now, we think that several big deals … of over €1-billion could take place either in the Netherlands or in France," he said.

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