Healthineers last week chose the swanky ambience of London’s five-star Jumeirah Carlton Tower Hotel to launch its IPO roadshow at the start of what promises to be a bumper year for stock-market flotations thanks to low interest rates, buoyant economic growth and rising corporate earnings. The healthcare unit of industrial giant Siemens spent six hours wooing some 130 investors and analysts, kicking off a race with Deutsche Asset Management, the fund unit of Deutsche Bank, which is also planning to go public before Easter.
The global volume of IPOs will reach $290 billion (€235 billion) this year, just below the all-time high of $300 billion reached in 2010, international law firm Baker McKenzie predicted. Big institutional investors such as Germany’s Union Investment are under mounting pressure to find lucrative investments at this time of historically low interest rates. Bankers and advisors expect Germany’s IPO volume to reach more than €13 billion this year, making 2018 the second-best year on record after 2000, at the height of the dot-com boom. Back then, new German company listings amounted to a staggering €31.4 billion.
Research firm Redburn expects Healthineers, whose products include X-ray and MRI machines, to sell €9 billion worth of stock, putting it close to the country’s biggest IPO to date, the privatization of Deutsche Telekom in 1996, where the first tranche totalled over €10 billion. Deutsche Asset Management’s IPO is expected to raise €2 billion.
Healthineers can point prospective investors to upbeat forecasts from analysts including Redburn and Morgan Stanley. Redburn has predicted its operating profit will grow by 6 to 7 percent, and that net income will increase 9 to 10 percent in 2019 and 2020. Morgan Stanley said the profit margin before interest and tax will rise by 2 to 3 percent in the next 3 to 4 years.
Siemens CEO Joe Kaeser wants the IPO to make his group more agile. To be sure, the group’s last IPO, of wind turbine giant Siemens Gamesa, wasn’t blessed with success. The firm’s stock has slumped after two profit warnings. But Healthineers is brimming with confidence. Its CEO, Bernd Montag, last week told Handelsblatt that the firm was better placed than any other company to shape the healthcare system of the future.
He will be selling the company’s growth narrative to long-term investors such as Blackrock, sovereign wealth funds like Singapore’s Temasek and unregulated hedge funds in the coming weeks. Financial sources expect hedge funds to snap up around one-third of the stock sale. The IPO is too big for investors to ignore.
Healthineers is reported to be planning its IPO in March. Whether Deutsche Asset Management can follow suit depends on how soon it can clear legal hurdles, which include a name change to DWS. That’s a mammoth task because some 6,000 contracts have to be altered. In addition, it hasn’t finalized its 2017 results which will form the basis for its IPO. So far, CEO Nicolas Moreau has managed to motivate his people into sticking to the schedule. The draft prospectus is close to completion, said financial sources, and Mr. Moreau and his team have already paid visits to important potential investors.
The management and supervisory boards of Deutsche Bank are certain to give the green light to the IPO. John Cryan, the bank’s beleaguered boss, needs the IPO to be a success so that he can present much-needed good news to the group’s annual stockholders meeting on May 24.
Healthineers and DWS may be the headline-grabbers but they're just the tip of the IPO iceberg. Consultancy EY expects up to 18 German firms to go public in 2018 – a healthy mix of company spin-offs, start-ups, family-owned businesses and stakes held by private equity firms.
“High valuations and low volatility are contributing to the good environment for IPOs — although there are risks factors such as Britain’s Brexit and the North Korea conflict,” said Martin Steinbach, a partner at EY. He said many firms want to seize on the positive conditions and float in the first half of 2018.
The first IPO of the year will be Bavarian drugs maker Dermapharm, a family business from Grünwald near Munich that plans to go public by mid-February. Its investment banks expect the specialist for skin disease and allergy treatments to sell capital worth €400 million based on the company’s estimated total market value of up to €1.75 billion. Around a quarter of its stock is being placed with investors.
Another first-quarter IPO will be real estate developer Instone Real Estate, said financial sources. The group is estimated to be worth over €1 billion, and a mid-range three-digit million sum is to be placed. Meanwhile, car-parts supplier Knorr Bremse is heading for a flotation that could amount to €4 billion, twice the planned volume of DWS.
Science publisher Springer Nature, owned by publisher Stefan von Holtzbrinck and financial investors BC Partners, is also planning an IPO that could exceed €1 billion.
Axel Höpner is head of the Handelsblatt office in Munich, Peter Köhler covers banks, private equity and corporate financing, and Robert Landgraf is Handelsblatt’s chief correspondent for financial markets. David Crossland and Jeremy Gray adapted this story into English for Handelsblatt Global. To contact the authors: [email protected], [email protected], and [email protected]