UniCredit SpA’s $9.9 billion rights offer is leading Europe’s stock sales to the best start of the year since 2007, a sign that the region’s companies may return to the equity markets after last quarter’s slump.
European companies raised a total of $14.3 billion selling shares in the first five weeks, 16 percent more than the year-ago period and the most in five years, Bloomberg data show. While businesses sought more in rights offers and additional sales, initial public offerings fetched $234 million, the lowest since 2009.
Equity sales in Europe bounced back from a nine-year low last quarter after the region’s leaders made inroads to tackle the debt woes and lenders received unprecedented cash from the European Central Bank. With stocks rallying for a second month and volatility halved from its September high, more companies may follow with stock offerings and the IPO market could eventually kick back in the second half, according to Societe Generale SA.
“It shows investors, encouraged by the market rally and lower volatilities, are now warming up to these deals,” said Laurent Morel, the Paris-based global head of equity capital markets at Societe Generale. “This is a good sign and may welcome more deals to the market.”
UniCredit’s rights offer attracted investors from the Abu Dhabi-based sovereign-wealth fund Aabar Investments PJSC to the Los Angeles-based investment fund Capital Research & Management Co., as well as Italian buyers such as Alessandro Proto Consulting.
The rights issued by Milan-based UniCredit doubled in their 10 trading days through Jan. 20, compared with an average gain of 5.5 percent for 1,160 European securities with a market value of above 500 million euros tracked by Bloomberg.
Meanwhile, Enel SpA’s disposal of its remaining 280.5 million-euro ($368 million) stake in Terna Rete Elettrica Nazionale SpA also drew demand from U.S. investors, which made up about 20 percent of the orders and had previously shunned Italy, according to UniCredit, which helped manage the offering.
“I wouldn’t have expected that just a few weeks ago,” Christian Steffens, UniCredit’s co-head of global capital markets, said in a phone interview. “The coming weeks will be decisive for companies that decide to brave markets with an IPO in March, April. Companies will only brave it if Greece settles.”
Greek political leaders announced an agreement today on austerity measures, clearing the way for a deal to cut the nation’s debt and win its second rescue in two years.
In the first half of 2011, Glencore International Plc led European IPOs to raise $23 billion, before the region’s debt crisis made stock markets plunge and higher volatility led investors to shun IPOs. Siemens AG’s lighting unit Osram AG and Spain’s national lottery operator Sociedad Estatal Loterias & Apuestas del Estado SA were among the companies that postponed IPO plans in the second half of 2011.
“Much like last year, it will be a year with stops and starts of activity,” said Steffens. “We could see a good phase for three or four months now.”
Additional share sales have surged recently, led by the $1.7 billion stock offering in January from Repsol YPF SA, Spain’s biggest oil company. Madrid-based Repsol sold the shares to pursue an exploration drive. Abertis Infraestructuras SA, Spain’s biggest toll-road operator, sold part of its stake in Paris-based satellite company Eutelsat Communications SA for about $1.2 billion.
A Centrica Plc shareholder, the Malaysian oil producer Petroliam Nasional Bhd., started selling its entire stake in the British energy company yesterday, which may raise as much as 594 million pounds ($941 million), according to terms of the sale obtained by Bloomberg News.
While Europe’s IPO market remains slow, its pipeline is substantial, with about 20 companies looking to raise more than $1 billion each in their new stock sales this year, according to data compiled by Bank of America Corp.
Credit Suisse Group AG is this year’s biggest equity underwriter in Europe, according to data compiled by Bloomberg today. It’s followed by UBS AG, JPMorgan Chase & Co and Societe Generale.
“IPOs tend to lag the overall activity as they require a longer period of market stability,” said Stefan Weiner, JPMorgan’s London-based head of equity capital markets for Germany, Austria and Switzerland. “That said, if the positive sentiment continues, we may see IPO windows open again before the summer break.”