Evonik CEO Finds Backdoor to IPO After ‘Painful’ Failures

Foiled in three attempts at listing Evonik Industries AG on Germany’s stock market, Chief Executive Officer Klaus Engel has found a new way to achieve an initial public offering of the $18 billion chemical maker.

This time, owners RAG Stiftung and CVC Capital Partners Ltd. sold a 12 percent stake to a group of investors from Singapore to the U.K. and Evonik will follow up in April with a small public offering of stock worth a three-digit-million euro sum. The company will achieve a long-held ambition to list, while avoiding the traumas of past attempts, Engel said.

“We have learned a painful lesson on the topic of IPO,” Engel told reporters yesterday in Essen, where the company is based. “What was difficult was finding a consensus between the owners’ valuation and what the market was willing to pay at that point in time. Now we have done it the other way round.”

Evonik will begin with a free float of as much as 14 percent, though the chemical maker with almost 14 billion euros ($18 billion) in sales is a candidate to join rival BASF SE (BAS) on Germany’s benchmark DAX index at a later stage. The private placements will count as traded equity and a small number of additional shares will be released into the market in the scaled-down offering next month with demand setting the price.

The maker of ingredients for cosmetics and food may eventually have a free float of about 75 percent if CVC sells its entire stake and RAG-Stiftung reduces its holding to about 25 percent, it has said.

In June last year, Evonik abandoned its third attempt at an IPO and the company said at the time that the cancellation reflects the conditions in the market and not the company’s performance. The maker of additives for plastics, glass and cosmetics also shelved IPO plans in 2008 and 2011.

‘Well Known’

Engel said there’s “hardly a big investor in the world that we have not spoken to” as the company marketed itself as an investment opportunity and each time market volatility put paid to those attempts.

Temasek Holdings Pte, Singapore’s state-owned investment company, agreed to buy 4.6 percent under the current IPO process. The sovereign investor was one of those spoken to during previous roadshows and Engel said he’s pleased to have such an investor on board.

“We flew around the world three times. We are well known,” Engel said. “Now that the capital market has stabilized a bit in the short term, there has been a chance.”

Evonik, which is marketing itself as a pure-play chemicals company, has a plan to whittle down its ownership of property. The real-estate assets have been combined with apartments belonging to the IG BCE union into a company called Vivawest which has property with a market value of about 6.2 billion euros.

Property Exit

RAG-Stiftung plans to take 30 percent of Vivawest and Evonik will place a further 25 percent in its pension fund. IG BCE will hold 26.8 percent. Evonik is talking to RAG AG about divesting a further 10 percent, potentially leaving Evonik with just 8 percent in the company, board member Thomas Wessel said at a press conference. BNP Paribas (BNP) advised IG BCE on the Vivawest deal.

Evonik predicts sales will rise this year and operating profit will remain at about last year’s level. Adjusted earnings before interest and tax fell 7 percent to 1.95 billion euros in 2012.

RAG Stiftung, a foundation that’s charged with winding down Germany’s deep-shaft coal mines, has earmarked proceeds from the share sale to pay for costs related to closing the mines. Before the sale to institutional investors, RAG Stiftung owned 75 percent of Evonik, while CVC, a U.K. buyout firm, held 25 percent.

The sale to private investors valued Evonik at about 14 billion euros, according to a person with knowledge of the transaction at the time.

Skadden Arps Slate Meagher & Flom LLP advised a group of more than two dozen institutional investors on the private placement, Skadden said.

To contact the reporter on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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