Portugal Expects Strong Investor Demand for CTT Ahead of IPO

Portugal foresees strong demand for shares in postal operator CTT-Correios de Portugal after it began taking orders from retail and institutional investors yesterday, said Sergio Monteiro, secretary of state for public works, transport and communications.

“That’s what we obviously expect,” Monteiro said in an interview. The government’s advisers on the sale held about 300 meetings with potential investors in CTT before the initial public offering. “The story that is being presented to investors I think is very robust,” he said.

State holding company Parpublica is selling 70 percent of Lisbon-based CTT, or as many as 105 million shares, with 21 million sold through the IPO and the remainder offered directly to institutional investors. Investors may bid for shares until Dec. 2 and trading is expected to start on Dec. 5, according to the IPO’s prospectus.

The IPO, the country’s first since EDP-Energias de Portugal SA disposed of a stake in its renewable-energy unit in June 2008, is taking place after the U.K. sold a majority stake in Royal Mail Group Ltd. last month and CVC Capital Partners in June sold shares of Bpost SA in the Belgian post office’s IPO.

Investors who bought shares in Royal Mail and Bpost will “probably” also be interested in CTT, Monteiro said.

Royal Mail

Royal Mail’s IPO, the biggest state asset sale in the U.K. since British Rail was broken up in the 1990s, raised 1.7 billion pounds ($2.7 billion) for the state in a stock sale that was seven times oversubscribed by small investors. A panel of British lawmakers is starting an investigation into whether the shares were under-priced.

“In the case of Royal Mail the share price rose to levels much higher than the initial offer but that’s not directly comparable” to CTT, said Monteiro. “In this case, the price we are offering is fair.”

CTT shares will be sold at 4.10 euros to 5.52 euros apiece, valuing the 493-year-old mail service at 615 million euros ($833 million) to 828 million euros, including a 30 percent stake that Parpublica will retain. The government will raise more money through the IPO than if it decided to sell the postal service directly to investors, Monteiro said.

“Even if in the end the sale is made at the lower end of the price range, it will be higher than the best valuations for a direct sale,” he said. The highest proposal the government received before it decided to carry out the IPO valued the company at 600 million euros, Monteiro said.

The sale of CTT, whose logo still appears on mailboxes and buildings in some of Portugal’s former colonies in Africa, will help Portugal raise revenue and comply with the terms of its 78 billion-euro bailout package from the European Union and the International Monetary Fund, Monteiro said.

Caixa Banco de Investimento SA and JPMorgan Chase & Co. are global coordinators and bookrunners for the IPO, with Banco Bilbao Vizcaya Argentaria SA and Espirito Santo Investment as co-lead managers.

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