Commerzbank Spurs Most German Share Sales Since 2000 Bucking Global Trend

Commerzbank AG’s 8.26 billion euros ($10.8 billion) of share sales this year propelled equity capital-market deals by German companies to the highest level since 2000, defying a worldwide decline. A backlog of initial public offerings means the trend may extend into 2012.

While the volume of stock, equity-linked and rights offerings dropped in the U.S., Japan, China, France and the U.K., German companies raised 24.3 billion euros this year, up 14 percent from 2010 and the most in more than a decade, data compiled by Bloomberg show. Globally, issuance fell 32 percent.

Europe’s biggest economy is forestalling the worsening debt crisis as business confidence unexpectedly rose for the first time in 10 months in December, and industrial production and retail sales climbed in October. Siemens AG (SIE)’s lighting unit Osram AG and chemical company Evonik Industries AG are clinging to IPO plans after market turmoil postponed proposed share sales in the second half of 2011. The DAX Index has dropped 22 percent since the end of June.

“Germany has a functioning business model and an industrial know-how,” said Robert Halver, head of research at Baader Bank AG in Frankfurt. “Economic data are still supportive.”

The amount issued on equity markets has dropped by 18 percent this year in Europe, the Middle East and Africa, according to Bloomberg data. In the U.K., two deals raised more than 1 billion euros, while in France only one deal exceeded that threshold.

Most Active

Commerzbank was the most active German issuer, using funds from three transactions to repay the government for aid received in 2008 and 2009, according to Bloomberg data. Porsche SE, the sports-car maker seeking to merge with Volkswagen AG (VOW), generated 2.5 billion euros in an April share sale, while Continental AG (CON), Europe’s second-biggest car-parts maker, and ThyssenKrupp AG (TKA), Germany’s biggest steelmaker, raised more than 1.5 billion each in March and July.

Kabel Deutschland Holding AG (KD8), Germany’s largest cable television operator, sold new shares twice for a total of 1.6 billion euros in March and July. RWE AG (RWE), the country’s second- biggest utility, announced a 2.1 billion-euro share sale last week.

Goldman Sachs Group Inc. (GS) helped arrange 24 percent of the German equity, equity-linked and rights offerings this year, while Deutsche Bank AG (DBK) and UBS AG (UBSN) were underwriters for 16 percent and 10 percent respectively of the total sold, Bloomberg data show.

Share Sale

Commerzbank has raised the possibility of another share sale in the coming weeks or months.

The European Banking Authority announced Dec. 8 that the Frankfurt-based bank must boost its equity base by 5.3 billion euros to reach a required 9 percent core Tier 1 capital ratio by mid-2012. Commerzbank, whose offer to buy back 600 million euros of hybrid instruments was due to end yesterday, said last week that “the issue of equity capital instruments is also an option.”

A capital increase of at least 600 million euros is likely in the next few weeks, said Matthias Duerr, an analyst at DZ Bank, on Dec. 5.

GSW Immobilien AG raised 407 million euros, the largest IPO of 15 in Germany this year. The total 1.69 billion euros gathered by German companies from IPOs represents about 7 percent of all proceeds from equity capital-market deals.

‘Credible Path’

“New issue activity in 2012 will be very much a function of a supportive market environment, requiring a credible path for a solution of the sovereign-debt crisis and encouraging macro data,” Philip Grosse, head of equity capital markets for Germany and Austria at Credit Suisse Group AG, said in a Dec. 7 interview. “In such a scenario, we do see a significant pipeline of IPOs as well as merger- and acquisition-driven refinancings and opportunistic monetizations.”

The list of potential German IPOs that may fetch more than 1 billion euros next year includes Evonik, Osram and Talanx AG, Germany’s third-biggest insurer.

An IPO for Osram, which had about 400 million euros of operating profit in the year ended Sept. 30 on sales of about 5 billion euros, remains the preferred option, Siemens finance chief Joe Kaeser said Nov. 10. The company said Nov. 30 that it aims to conclude the share sale during this fiscal year.

Evonik and owners RAG Stiftung and CVC Capital Partners ruled out an IPO of the chemical maker this year. The company is prepared to restart the share sale process if stock markets improve, Essen, Germany-based RAG Stiftung said on Sept. 23.

IPO Backlog

“There is a substantial backlog of significant IPOs that are likely to materialize in a more supportive market environment,” Grosse said.

The benchmark DAX entered a bear market in August, falling more than 20 percent from its high in May, amid concern Europe’s debt crisis will derail economic growth. Strategists at Deutsche Bank expect the DAX to end 2012 at 6,600 after a weak start. That would be up 14 percent from yesterday’s closing price.

While the German economy has proven resilient, there are signs of weakness. Exports, which make up about 40 percent of the country’s gross domestic product, fell more than economists forecast in October, and the government failed to get bids last month for 35 percent of 10-year bonds sold at an auction.

The Bundesbank cut its 2012 growth forecast for Germany last month to between 0.5 percent and 1 percent from a June prediction of 1.8 percent, and said a “pronounced” period of economic weakness can’t be ruled out if the debt crisis worsens. German growth may slow to 0.8 percent in 2012 from 2.9 percent this year, the European Commission said on Nov. 10.

Standard & Poor’s said Dec. 5 that Germany may be stripped of the AAA credit rating it has held since 1983. The nation, along with AAA-rated France, the Netherlands, Austria, Finland and Luxembourg, were among 15 countries sharing the common currency that were put on review for possible downgrades.

Moody’s Investors Service also is reviewing the sovereign ratings of European countries.

To contact the reporters on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net; Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editors responsible for this story: Andrew Rummer at arummer@bloomberg.net; Angela Cullen at acullen8@bloomberg.net

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