High Expectations for Public Offerings
January 7, 2004
European markets have trudged through several dismal years when it comes to new public offerings. It's a stark difference from the heady days of the late 1990s and 2000. But things began to pick up in late 2003, and market-watchers are hopeful that 2004 may bring a significant upturn in the number of European IPOs.
In the fourth quarter of 2003, 67 companies went public in Europe, according to a report called IPO Watch Europe from PricewaterhouseCoopers – up from 33 offerings in the third quarter and from 38 in the fourth quarter of 2002. The report includes activity in the 15 EU countries as well as Switzerland and Norway.
€30 billion expected from IPOs in 2004
Dealogic, which tracks IPOs, said European offering brought in just €5.6 billion in 2003, down from the record €398 billion in 2000. It expects 2004 to bring in €30 billion, with the biggest offerings being Belgacom, the Belgian telecommunications firm, worth €4 billion, and the Deutsche Post’s Postbank, listed at €2.5 billion.
“We expect the next year to be a turning point for Germany,” Volker Fitzner, a partner in the corporate finance division of PricewaterhouseCoopers, told Manager Magazin. “The Postbank will play a special role, because if it’s successful it could break the ice for further public offerings.”
The Postbank offering is expected in fall 2004 – and it recently announced that some of the shares will be available to private investors.
The Postbank is Germany’s largest financial services provider and has more than 11 million customers. Postbank boss Wolf von Schimmelmann has said that he expects record profits in 2004. And one recent coup is expected to contribute to its 2004 performance – starting this year, it will begin handling monetary transactions for the Deutsche Bank and for Dresdner Bank.
An attempt to improve profits by up to €100 million
In addition, the bank has instituted a program called “Fit for the Future” under which it plans to lower costs and improve service with a goal of boosting profits by €80 to €100 million annually.
The bank is also seeking out wealthy customers and plans to have more than 500 bank branches in post offices throughout Germany. In addition, it plans to cut overhead by slashing jobs from 8,800 to 7,500.
“Postbank is currently undervalued,” Norbert Schäfer, a spokesman for the parent company Deutsche Post, told Deutsche Welle. “That will change when it goes public. We expect to take in around €2.5 billion with the share issue. We’ll be able to use that money to pay off debts and undertake new investments. It’s a huge boost for the company.”
Indeed, there is reason for optimism on the European markets. But Georg Hansel, head of German equity capital markets at Deutsche Bank in Frankfurt, sounded a note of caution. “There’s an unbelievable increase in activity,” Hansel told Time Magazine. “But there are just a few big deals handled by fewer banks. The dotcoms aren’t coming back yet."