Travelport IPO pull strikes blow to nascent market

LONDON Thu Feb 11, 2010 12:46pm EST

A British Airways jet comes in to land at Heathrow Airport west of London November 13, 2009. REUTERS/Luke MacGregor

A British Airways jet comes in to land at Heathrow Airport west of London November 13, 2009.

Credit: Reuters/Luke MacGregor

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LONDON (Reuters) - Travelport's scrapped listing shows investors are wary to buy private-equity backed assets, casting a cloud over planned sales of travel firm Amadeus, theme park operator Merlin and retailer New Look.

Blackstone-backed Travelport, forced to call off its $1.8 billion Initial Public Offering (IPO) after lowering its price, follows a raft of failed flotations in Europe, with investors unwilling to help companies reduce debt.

"Investors are particularly cautious about IPOs for companies which need to issue a lot of shares just to reduce leverage," said Craig Coben, head of EMEA equity capital markets origination at Bank of America/Merrill Lynch.

"Investors want to invest in growth and not in de-leveraging," he said.

Other listings that fell through recently are those of Belgium chemical firm Taminco, UK bank Walton & Co. and Germany's Hochtief Concessions.

Travelport's listing would have been the biggest in London in two years and its failure is an embarrassment to Blackstone, which looks to float six further companies, including Merlin Entertainment, the owner of Legoland and the London Eye.

"Investors in the quoted market are not really enthusiastic about being the buyer of last resort for these used private equity investments," said one UK fund manager.

"The market remains open for good companies with good prospects that have a sensible raison d'etre for listing, but as a dumping ground for private equity? No, thank you."

Of the 62 IPOs launched since December 1 2009 globally, 32 were shelved -- 15 in the U.S., 7 in Europe and 10 in Asia.

Deals worth $9.6 billion were canceled, more than the $8.2 billion raised by the 30 successful listings.

DUAL TRACK

Germany's largest cable television operator Kabel Deutschland -- 88 percent owned by Providence Equity Partners -- is still preparing an IPO of at least 1 billion euros ($1.38 billion), sources familiar with the situation say.

But it looks increasingly likely that it will be sold to any of a handful of private equity firms circling the company, in a deal worth up to 5 billion euros.

Some fund managers say they don't like it when a public flotation is prepared at the same time as a possible sale to another buyout firm.

"We don't like the dual track process -- this is not the right way to do business," said the UK equities head of one investment firm, asking not to be named.

Retailer New Look, hoping to raise 650 million pounds to cut its debts and to invest in new stores, has said it wants to complete its IPO by mid March but has not ruled out a private sale.

"We are open to the right IPOs -- when a company comes to the market to grow ... Venture capitalists are going to struggle and I think New Look will struggle," said Andy Brough, a fund manager at UK group Schroders.

Some investors said private equity companies would have more success looking to sell their investments in the buyout market itself, rather than seeking a listing.

"These companies should be recycled within the private equity market rather than risking the embarrassment of a low rating in the public market because they can always put what price they want on it," a fund manager said.

But rival Matalan showed Wednesday that price is an issue. It abandoned a process to sell itself after private equity houses baulked at the asking price. New Look is hoping for better luck. A spokesman for the firm said: "our process is continuing," and sources familiar with the deal said that the bookbuilding process will start next week.

Markets had been expecting Travelport rival Amadeus to come to market around March, but BC Partners and Cinven-owned Amadeus has yet to announce its $3 billion listing.

($1=.7251 Euro)

(Editing by Elaine Hardcastle)

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