Wavin cuts IPO size in face of apathy

CVC backed Dutch pipemaker Wavin had a tough time getting to the finish line with its IPO last week, but after a reduction in deal size, the float was priced at the bottom of the €11.00–€13.50 range. Proceeds totalled €366m from the sale of 13.6m primary and 19.7m secondary shares (down from an original plan to sell 34m secondary shares).

Going into the last couple of days of the bookbuild, the deal was around two-thirds covered when it was boosted by an order from a top UK account for about 10% of the offer. But at that stage it was already clear to those working on the deal that the bottom of the range would be the only realistic pricing level, where the company was at an attractive 10% discount to its main comparable, Uponor.

Added pressure on the bookrunners – ABN AMRO Rothschild, Lehman Brothers and Merrill Lynch – came from the fact that CVC, the main selling shareholder, was thought not to be willing to sell below €11. There had been investors pressing for prices down to €10, but if the deal was to go ahead the only possible flexibility was on the number of shares to be sold.

Also complicating the situation was the fact that the private equity firms were running a dual-track process, and had plenty of other recap options available to them. CVC’s pre-deal holding was 80.9%, while Alpinvest, the other seller, held 9.1%. They are left with 57%.

A number of accounts pulled out of the deal during the last day, when bankers working on the trade communicated that the IPO could be reduced despite the fact that it was covered at the original size.

Bankers said that some accounts had been startled by the scale of the downsizing, and there was talk of some being unhappy at the eventual smaller allocations.

There were also differing opinions as to whether the original deal size had ever been a realistic option in view of the number of mid-cap deals that accounts are being asked to look at. Some pointed to the almost complete lack of domestic demand – which is considered to be essential for a sizeable deal from a mid-cap – as the biggest problem.

On debut the stock did not drop below the €11 issue price, rising to a high of €11.67 before settling the day at €11.50, up 4.5%. On Friday it continued to trade around the same level.