* Sale of up to 50 pct of shares to happen in Feb-sources
* Deal could signal returning investor confidence in IPOs
* LEG a candidate for inclusion in German midcap index
* Net asset value of LEG real estate portfolio 2.37 bln eur
* No capital hike planned - sources
FRANKFURT, Jan 7 (Reuters) - German residential property group LEG is planning to list its shares on the stock market within six months in a sign that a recent pick up in IPO activity in Europe is likely to continue.
The share sale, which could be worth around 1 billion euros ($1.3 billion), would be a positive step for an IPO market which only started to recover in the final months of 2012 having previously struggled amid Europe’s debt crisis and sluggish economic growth.
In the last year as a whole, the volume of share issues slumped more than 60 percent despite a late pickup in IPO demand driven by rallying stock markets.
Sources close to the LEG transaction told Reuters the listing of the company, which own 91,000 residential apartments, is likely to take place in February, since an intention to float is usually issued four weeks ahead of an offering.
While the IPO recovery remains fragile, the lack of activity through much of last year has left a backlog of deals which could come to market in 2013, bankers said.
A continued upturn would be particularly welcome for investment bankers whose earnings and bonuses are contingent on deals such as bringing new companies to market.
It would also be a positive trend for companies and their owners looking to raise funds.
If markets remain stable and confidence continues to improve, a greater flow of deals can be expected as investors begin to move their money back into stocks and out of bonds, bankers added.
“Conversations with investors (in potential new share issues) are a lot more constructive than they have been for a long time. There is now a lot of dialogue going on at a much earlier stage,” one Europe-based equity capital markets banker said.
Auditor PwC said last week it expects up to 14 IPOs in Germany this year, after the country saw only two sizeable flotations in 2012, of insurer Talanx and mobile phone operator Telefonica Deutschland.
In Germany, LEG is also the first of two large real estate groups aiming to list on the stock exchange this year.
Deutsche Annington, owned by private equity firm Terra Firma and which holds apartments with a total value of about 10 billion euros, is considering a listing in late 2013.
The groups are likely candidates for inclusion in either the blue chip DAX or midcap MDax indexes. Companies with a free-float of readily tradeable shares worth some 5 billion euros usually qualify for inclusion on the Dax, while 1 billion euros is usual for the MDax index.
Last year, LEG had said its enterprise value stood at 4.7 billion euros, including debt of 2.3 billion. The net asset value of LEG’s real estate portfolio was 2.37 billion euros as per end-September 2012, LEG said on Monday.
According to the sources close to the deal, the owners - 90 percent investor Whitehall and 10 percent owner Perry Capital - will sell a minority stake in the IPO. No capital hike is planned, they added. Whitehall is a Goldman Sachs investment fund.
Potential LEG investors are being told that a stake of up to 50 percent will be listed on the stock exchange, one source said, while another said about a third of the shares will be placed.
Given anticipated strong investor demand, the so-called IPO discount that is common for new issues will be a low single-digit percentage, the first source said.
The Duesseldorf-based company has picked Goldman and Deutsche Bank as main advisers for the offering. Berenberg Bank, Commerzbank, Erste Bank and Kempen will act as co-lead managers.
Whitehall and Perry bought LEG in 2008 from the German regional state of North Rhine-Westphalia for 3.4 billion euros.