Wendel targets Saint Gobain stake

The flotation of Bureau Veritas backed by Paris listed private equity group Wendel Investissement got underway today marking this years biggest private equity backed IPO.

Wendel has confirmed that the circa €1.2bn raised through the IPO of the French certification company will be used to increase its stake in construction materials group, Saint Gobain, from 6% to 10%.

Wendel has so far said that its plans for Saint Gobain are friendly and that it supports management. The Paris-based firm declined to comment during the IPO process, but a source close to the firm confirmed the plans to increase the stake in Saint Gobain to approximately 10%. The source added that Wendel plans to double the size of its net assets over the next five years to €12bn and deliver a 15% year-on-year increase in dividends. “Over the next five years, we will have more than €3bn for new acquisitions and we see opportunities arising out of the current turbulence,” the source said.

With a book of demand in excess of €9bn, Wendel priced its spin-off IPO of Bureau Veritas at the top of the €32.5–€37.75 range to raise €1.078m, valuing the company at €3.48bn. An additional over-allotment option could take final proceeds to €1.24bn. BNP Paribas, Deutsche Bank, Goldman Sachs, HSBC, SG were joint bookrunners.

In spite of the volatile market backdrop, price sensitivity was very limited and the nine times covered book was still seven times covered at the top of the range. Pricing values the company at a 2% discount to Swiss peer SGS on EV/Ebitda multiples and a 4% discount to UK peer Intertek.

A solid aftermarket on day one eroded some of that discount. The shares initially jumped as high as €38.75, but settled marginally above issue price at €38, outperforming peers. Intertek was down 1.3% on the day and SGS down by more than 2% (see IFR Buyouts 69 front page).

Wendel sold 27.7 shares, reducing its 98% holding to 67.6%. Company managers sold 0.8m shares alongside for a total freefloat of 31%. Wendel is locked up on its holding for 180 days and intends to retain majority control of the company. Selling shareholders are locked up for a year.