It was hardly the most ringing endorsement for the outlook for the Australian sharemarket.
But in the end, the main objective – Germany’s Bilfinger Berger in postponing the float of its Australian business (named Valemus) – was not to underprice it and launch it into a difficult market.
So it cancelled the current attempt and says it will go again early next year, depending on market conditions.
But the future of other floats said to be in the pipeline will now be questioned.
The $1 billion spin-off of the Dulux Group is the next one to go and we will get an update tomorrow from a meeting of Orica shareholders that will vote on the separation.
But seeing that’s a demerger to shareholders, it should be OK.
The Valemus float was to have been the biggest since the IPO of Myer in November.
That has hardly set the gold standard and the shares are down 21% since the flotation and have never achieved their issue price of $4.10.
And figures last week from Deloittes showed that the June half of this year saw a significant drop in the size of market floats, with the maximum being $50 million, against Myer’s $2.1 billion and the maximum sought from the Valemus deal of around $1.6 billion.
So given that background, and the current market uncertainty, it’s no wonder Bilfinger pulled the float for the time being.
After all, why give away value to Australian fund managers and others who have been talking down the float’s prospects in the past week to 10 days to try and get a lower entry price and therefore improve the prospects of stagging profits for their portfolios?
Bilfinger’s objective was to maiximise returns from the sale for its shareholders, while making sure the local arm was well capitalised, had good business prospects and ensuring that the sale price fairly represented that position.
So the reasoning in yesterday’s statement wasn’t too hard to understand.
The core argument was: the float at $2.20 and $2.50 apiece “cannot realistically be achieved” (i.e. big investors want a price lower than we were prepared to accept).
The float was looking to raise up to $1.6 billion. A figure around $1.4 billion was considered more likely.
Bilfinger Berger said the postponement was ‘‘due to negative developments on the capital markets’’.
‘‘Bilfinger Berger’s asking price for the Australian business cannot realistically be achieved in light of the current adverse conditions on the stock exchange,’’ the company told the Frankfurt exchange.
The ASX 200 is down 13% this year, and had fallen 2.4% since the IPO was announced on June 8.
Actually that’s not a bad performance for the market: US markets lost 4% to nearly 6% last week alone, with similar falls in Europe and parts of Asia. The Shanghai market is down 27% this year, Greece 47%.
Valemus was marketed here and overseas, so you could argue that the weakness seen in the US, Asia and Europe played as much a role as whatever part the Australian decline might have played.
The chief executive of Valemus, Peter Brecht, said his management team had met with ‘‘a large number of institutions both locally and abroad in the past month and received positive feedback from investors on the company’’.
But, ‘‘due to the current adverse equity market conditions, we understand why Bilfinger Berger has taken the decision to postpone the IPO,’’ Mr Brecht said in a statement.
Bilfinger says it will be early in 2011 before the float can be tried again.
That will need a significant change in markets and investor confidence.
