French electrical company Legrand has launched bookbuilding for its long-awaited IPO. The deal marks the return to the public markets for the firm, and is also being viewed as a benchmark of investor appetite for European IPOs this year. It is a familiar name to investors, but its size and private equity backing still provide a significant test.
Legrand kicked off its IPO last week, beginning a process that sees it return to the public markets after almost four years as a private company. It was almost taken private by Schneider in 2001, before that deal was reversed by EU regulatory authorities, and it was finally bought out by private equity the following year. The IPO will be for about €1bn and implies a market capitalisation of around €5bn and an enterprise value of about €7bn.
Legrand’s current owners, a group of private equity firms led by KKR and Wendel Investissement, paid €3.75bn for the company in December 2002. Since then, it has been leveraged up and, being almost exclusively primary, the IPO will serve to refinance some of the outstanding debt.
KKR and Wendel will be left with around 60% post-IPO, diluted from 75%. The other private equity owners – WestLB, Montagu Private Equity and Goldman Sachs Capital Partners – will own 15% and management will hold 4%. In February this year, Legrand completed a €2.2bn refinance loan, taking out a previous €1.4bn loan and all its outstanding high-yield bonds. The money raised in the IPO will leave the company with about €2bn of debt.
One syndicate banker put Legrand’s 2006 EV/Ebit multiples at 11.4x–12.3x, based on the price range. Schneider is currently trading on an estimated 2006 Ebit multiple of 11.5x, according to Societe Generale research. Another banker involved in the deal said that consensus EV/Ebitda multiples for 2006 were 9x–9.7x for Legrand, with Schneider currently on around 9.2x. Bookrunners of the IPO are BNP Paribas, JPMorgan, Lehman Brothers and Morgan Stanley.