European companies are preparing the most initial public offerings in two years after IPOs weathered the region’s debt crisis and outperformed U.S. deals.
Fairfield Energy Plc, Stroer Out-of-Home Media AG and 57 other companies filed with regulators in the past three months to raise $14.2 billion through initial sales, the most since the second quarter of 2008, according to data compiled by Bloomberg. European IPOs have advanced an average of 3.5 percent this year, while newly listed U.S. shares slid 7.6 percent, the data show.
More European companies went public last month than in any period since July 2008. While concern about widening deficits drove the benchmark Stoxx Europe 600 Index down as much as 15 percent this year, Ernst & Young LLP and JPMorgan Chase & Co. forecast that offerings will increase after nine of the 10 biggest IPOs of 2010 posted gains.
“The European IPO market is no longer a wasteland,” said Julie Teigland, a Frankfurt-based partner at Ernst & Young who oversees the strategy for companies seeking capital in Europe, the Middle East, India and Africa. “The fact that they had such a strong performance even during the debt crisis gives people hope.”
IPOs from 77 companies in western Europe have raised $13.7 billion this year, exceeding the $12.9 billion in 83 U.S. initial sales, data compiled by Bloomberg show. While 38 American companies have postponed or withdrawn offerings, 12 were shelved in Europe, according to the data.
North Sea Oil
Fairfield Energy of Middlesex, England, which explores for oil in the North Sea, and Ocado Ltd., an online grocer in Hatfield, England, will seek to raise a combined 1 billion pounds ($1.5 billion) this month in London IPOs.
Stroer, the Cologne, Germany-based outdoor advertising company, plans to sell 322 million euros ($405 million) of shares before listing in Frankfurt on July 15.
The offerings are coming after Hoersholm, Denmark-based Christian Hansen Holding A/S, Jupiter Fund Management Plc in London, Amadeus IT Holding SA of Madrid and Issy-les-Moulineaux, France-based Medica gained at least 10 percent following IPOs that raised more than $300 million, Bloomberg data show.
Primerica Inc. and Oasis Petroleum Inc. of Houston are the only U.S. companies to climb more than 10 percent after an initial sale of at least $300 million this year, according to Bloomberg data. Duluth, Georgia-based Primerica, the insurance business that Sanford I. “Sandy” Weill used to build Citigroup Inc., rallied 37 percent after raising $320 million in March.
“The sizeable European deals are doing exceptionally well if compared with large IPOs elsewhere,” said Chris Whitman, London-based global co-head of equity capital markets at Deutsche Bank AG. “This is positive for future deals.”
Some of the biggest European IPOs are still trading below the original price sought by the company. Essar Energy Plc, India’s second-largest private power producer, has climbed 4.5 percent to 439 pence since raising 1.27 billion pounds in London’s biggest sale of the year on April 30. That left the shares 2.4 percent below the low end of the initial offering range of 450 pence to 550 pence, Bloomberg data show.
Speculation that Europe’s debt crisis will curb economic growth and keep stock-market volatility elevated may also weigh on IPOs in the second half of the year, according to John Crompton, HSBC Holdings Plc’s London-based head of equity capital markets.
The U.S. economy will grow 3.1 percent this year, compared with the 1.1 percent rate for the group of 16 countries using the euro and the U.K.’s 1.2 percent, economists’ estimates compiled by Bloomberg show.
The VStoxx Index, a gauge of equity-market volatility that measures the cost of protecting against declines in the Euro Stoxx 50 Index, has climbed 43 percent since March 26.
“Investors still feel a bit uncomfortable about current volatility levels,” HSBC’s Crompton said. For IPOs, “the main challenge is market-based,” he said.
Still, the VStoxx has retreated 43 percent since May 20, while the Stoxx 600 posted its biggest advance in a year last week as the Washington-based International Monetary Fund raised its forecast for global economic growth.
Equity strategists surveyed by Bloomberg last month projected that the fastest expansion in corporate profits since 2004 will send European stocks to their biggest two-year advance in a decade.
“It’s reassuring that many European IPOs this year have survived the angst around the sovereign crisis and have performed pretty well,” said Viswas Raghavan, London-based head of international capital markets at JPMorgan, this year’s biggest underwriter of IPOs in Europe, the Middle East and Africa. “Now with things looking calmer, the second half could be more exciting given the strong pipeline.”