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| Ziggo | |
| Size | €925 million IPO |
| Date | October 2012 |
| Joint global coordinators and joint bookrunners | JPMorgan, Morgan Stanley |
| Joint bookrunners | UBS, Deutsche Bank |
| Joint lead managers | ABN Amro, HSBC, Nomura, Rabobank |
| Co-lead manager | Société Générale CIB |
| Sponsor adviser | STJ Advisors |
| return to the Global Deals of the Year index | |
If Telefónica Deutschland’s €1.5 billion IPO in October last year gave hope to equity capital markets bankers that a resurgence in large European offerings was back on the cards, it was a smaller but perhaps more perfectly formed transaction in March that actually helped set a more ebullient tone.
Although Telefónica Deutschland’s IPO was the biggest in Europe last year and a blowout success to boot, the €925 million IPO of Ziggo, the Dutch cable operator owned by private equity sponsors Cinven and Warburg Pincus, arguably enabled the October deal and others before it to be sold at all.
The European IPO market, after all, had effectively been in total shutdown during the previous nine months, with no IPO over $50 million having been priced since July 2011 and market confidence fractured by a string of companies, both big and small, trying but ultimately failing to list.
So any company planning to buck this trend not only had to be attractive on almost every measure equity investors could judge it on, but also have sufficient conviction to stay the course and see it through to the end.
Patience and preparation are valuable strengths too. Having initially mandated three investment banks in March 2011 to float Ziggo’s shares, Cinven and Warburg Pincus decided against pulling the trigger given the volatile state of the markets throughout much of that year.
Instead, the sponsors, which were advised by STJ Advisors, worked with joint global coordinators JPMorgan and Morgan Stanley, and joint bookrunners Deutsche Bank and UBS, which was mandated after the original three, to engage in a round of pre-deal education meetings with a number of key target investors.
It was a strategy that ultimately paid off, and by early 2012 Cinven and Warburg Pincus were ready to pull the trigger, and did.
Amid market volatility, the IPO launched on February 29 and by the end of the first day €577.5 million to €647.5 million of the deal was covered, illustrating the success of the investor education meetings and that there was some real momentum in the order book. This ultimately enabled the bookrunners to bring forward the pricing by a day and seek to price the deal at the top of the €16.50 to €18.50 range – valuing Ziggo’s equity at €3.3 billion to €3.7 billion.
On the final day of bookbuilding, March 19, the offering was increased by 25% from 35 million shares to 43.4 million, to raise €804.3 million before the deal was finally priced the day after at €18.50 a share.
The final book was multiple times oversubscribed and filled with close to 600 orders, the bulk of which were long-only UK and US institutional investors.
In the end, once the greenshoe was exercised, Ziggo had raised a total of €924.9 million and had not only reopened the European IPO market and priced the largest Dutch non-financial corporate IPO for over a decade, but had also at last given equity market participants something to cheer about.
For Klaus Hessberger, co-head of equity capital markets, Europe, the Middle East and Africa at JPMorgan, the main reasons for the success of the deal were clear. “Ultimately Ziggo is a great equity story combined with a strong management track record,” he says. “Those two elements combined contributed to the success of the IPO and its aftermarket performance.”
Ziggo’s share price outperformed in the days and months after the IPO, and by July its shares had risen 35% on the flotation price, making it the most successful aftermarket performance of all western European IPOs during that last three years, according to UBS.
Educating investors undoubtedly helped to boost the share price performance too. Hessberger adds: “The detail and quality of the preparation was important. We introduced management to key target investors ahead of the IPO so they could fully understand the company and new management when we hit the market.”
Edward Sankey, global co-head of equity syndicate and co-head of ECM EMEA at Deutsche Bank in London, shares this view and believes the rarity value of high-quality European cable assets also played a part in driving demand and the deals’ ultimate success.
“Ziggo is a great equity story that played directly into deep investor appetite for exposure to European cable assets,” Sankey says. “There are few cable companies in Europe that investors can get exposure to, and when you combine that with the track record of the management team, there was always going to be strong interest in the IPO.”
Executing the deal wasn’t all plain sailing, though.
“The market backdrop was challenging, with a lot of volatility – the VIX index was trading around the mid 20s vol at the time,” says Hessberger. “The other challenge was the fact this was an ice-breaker of a deal – there were no meaningful data points out there to use. Therefore, the owners had to rely on our market judgment before pulling the trigger.”
It was a judgment call that, thankfully, they called right, enabling Ziggo to hit the market with an increased float, secure top of the range pricing and witness an aftermarket performance any company CEO, and ECM banker, would be envious of.
