Nets Starts Trading as IPO Values Firm at $4.5 Billionby and
Shares open higher, but lose ground after morning trading
CFO says company has no plans to move into other markets
Nordic payments firm Nets A/S started trading in Copenhagen Friday after its shares were oversubscribed in an initial public offering.
After initially gaining as much as 4.7 percent, shares of the company formerly known as Nets Holding A/S fell 3.3 percent to 145 kroner at close. Investors had paid 150 kroner a share in the IPO, according to a statement to the Danish capital’s stock exchange Friday.
Nets shares were subscribed on the first day of the sale and it ended early because of strong investor demand. The IPO values the company at 30 billion kroner ($4.5 billion), with 52 percent of the firm in free float, and not including a so-called over-allotment. That makes it the second-largest listing in Europe so far this year after the sale raised 15.75 billion kroner.
Companies in the region raised about $22 billion from IPOs this year, about half the amount they obtained in a similar period in 2015 as political uncertainty in key markets affected investor appetite.
The company is being sold by private equity funds Advent International Corp. and Bain Capital, as well as Danish pension fund ATP. The consortium of owners behind the IPO agreed to buy Nets for 17 billion kroner from a group of Nordic banks, including Danske Bank A/S, Nordea Bank AB, DNB ASA and Denmark’s central bank, in March 2014.
Klaus Pedersen, Nets chief financial officer, said the company’s newly won financial flexibility will help it focus on investment in growth markets. There’s also room to consider acquisitions, though these will mostly be small, he said.
“The third priority is to pay dividends to our shareholders,” Pedersen said by phone. “If there’s excess cash after paying dividends, then that will also go to the shareholders. Our goal is not to maximize our cash holdings.”
Nets’s strategy will remain focused on the Nordic region, and “any acquisitions would respect that model; we also have no interest in moving into other business areas,” Pedersen said. “We expect to be able to grow organically by 5 to 6 percent a year” so “the balance here between risk and reward is really attractive.”
“The Nordics continue to be in favor with investors, they are structurally and economically viewed as premium regions for investment in Europe and their IPOs have all performed,” said Saadi Soudavar, head of Nordic equity capital markets at Deutsche Bank AG. Investors expect "some very sizable IPOs" from sellers in the region in the next six months, he said.
The company used the IPO in part to reduce its debt levels. It’s working to get its gearing ratio of debt to equity to between 2 and 2.5 times from 3.75 times after the shares sale, Pedersen said. “That’s doable within about two years,” he said.
Nets has, in connection with its IPO, refinanced much of its debt and there are no plans to adjust the current setup, Pedersen said. “We think we’ve obtained very competitive financing costs on our debt issuance.”
The company’s main strength is operating in a market that is highly literate when it comes to digitization, according to the CFO. A lot of places are far behind the Nordic countries in terms of digitization and it takes much less time to roll out new solutions in the region than it does elsewhere in Europe, he said.
“We think the Nordic market is fantastic,” Pedersen said. “Consumers are interested in new solutions, new technology. The political backing for digitization is also strong. So we’re in a very attractive region.”
Nordea, Morgan Stanley and Deutsche Bank were the main advisers on the sale.