LONDON, July 3 (IFR) - Dubai-based oil rig supplier Shelf
Drilling cancelled its London initial public offer of shares on
Wednesday in an unsurprising move given the lack of any
messaging on subscription levels or price guidance during
"This decision has been reached due to challenging public
market conditions despite a positive response from prospective
investors to the company, its strategy and operations," the
company said in a regulatory statement.
That does not entirely tally with recent issuance after more
than $8.35 billion of $50 million-plus European IPOs priced last
week, comprising 12 listings, including six priced by Shelf
Drilling's joint global co-ordinators Goldman Sachs and Morgan
Bankers have warned in the past fortnight that the flow of
issuance and patchy aftermarkets have led to investors becoming
increasingly picky on IPOs and pricing. Certainly there is no
belief that now is a difficult time to sell a new issue.
Shelf's lead banks are running the Madrid IPO of Spanish
logistics group Logista and the London listing of food
concessions business SSP, which both opened books on Friday. In
addition, Morgan Stanley is a global co-ordinator on ING's
insurance arm NN Group, which priced on Wednesday, and Goldman
Sachs is a global co-ordinator on the Milan IPO of drug
maker Rottapharm, which began bookbuilding on Wednesday.
One banker working on Shelf Drilling put part of the blame
on weakness on the Dubai exchange, with the benchmark DFM
General Index having lost almost a third of its value
from its May peak. Yet this is largely driven by difficulties at
construction group Arabtec and the collapse in its
"What happened in Dubai was unfortunate," said the banker.
"It's a bad time to be in that market, especially when the rest
of the world is so stable, so that didn't help."
However, a banker who covers the Gulf region countered that
"it is true that local markets are volatile, but that shouldn't
really affect a London IPO. Shelf is a very good asset."
For example, Gulf Marine Services, a peer for Shelf
Drilling, floated in London in March and has been untouched by
the local market difficulties.
A potential concern for the market is another banker's claim
that price was not the issue. "Price was not the fix on this as
investors told us that a valuation of four times P/E and six
times EBITDA made sense," he said.
There was apparently no desire from the company to price
Price guidance on the deal had been set at 270-370 pence,
with the company targeting $250 million in proceeds, along with
selling from owners Castle Harlan, CHAMP, Lime Rime and some
members of the management team and non-executive directors. The
overall deal size had been expected to be around $500 million.
Goldman Sachs and Morgan Stanley were joint global
co-ordinators and joint bookrunners with HSBC and RBC. Tudor,
Pickering & Holt and Liberum were co-lead managers.
(Reporting by Abhinav Ramnarayan)