German IPO gives buyout shops scant cause to cheer
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Yawen Chen
LONDON, Oct 4 (Reuters Breakingviews) -Springer Nature’s SPGG.DE private equity owners can now heave a sigh of relief. After two failed attempts to list the German academic publisher, BC Partners has finally succeeded. But the discounted price and mere 7% post-listing pop is a warning to other private equity shops looking to sell.
Springer Nature’s financial advisers have learnt from previous flounders. During the height of the pandemic in October 2020 they were forced to scrap a planned listing, having sought to raise nearly 1 billion euros ($1.1 billion) for the publisher, an ambitious target given that the company’s debt pile was nearly 6 times 2019 EBITDA. This time, they were more cautious, opting for a much smaller 600-million-euro float. The funds raised in the listing cut the company’s net debt to 2.7 times EBITDA.
The current advisers – led by Deutsche Bank, JPMorgan and Morgan Stanley – also offered the shares up at a bargain price. Springer Nature’s IPO price values the company at 4.5 billion euros, which is just 11.5 times its forecast 2025 operating profit, according to a person familiar with the matter. That compares to around 16.5 times for competitor Elsevier, a division of $88 billion RELX REL.L, or to the around 14 times of Taylor & Francis, part of $14 billion Informa INF.L, the source added.
Investors have good reason to believe Springer Nature could grow into these levels. Its lower operating profit margin of 28% versus Elsevier’s 37% and Taylor & Francis’ 35% reflects its decision to offer its educational materials for free in recent years, but that business model is also driving growth. Last year, it raised underlying revenue by 5.2% by signing more contracts with big research institutes and universities. In comparison, Elsevier’s only grew 4% and Taylor & Francis’ 3%.
But the discount to rivals and strong growth were not enough to rally investors. On Friday morning Springer Nature’s shares opened just 7% above the listing price. There are plenty of buyout firms who are watching this float closely, hoping it will show investors are hungry for new paper. Bain and Cinven have held German drug manufacturer Stada since 2017, for example. EQT EQTAB.ST has been invested in hearing aids producer WS Audiology since 2019. Advent and Cinven are among a consortium that bought elevator business TK Elevator for 17 billion euros in February 2020. But Springer Nature’s ho-hum listing suggests caution and discounts are important chapters in the buyout shops’ playbook.
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CONTEXT NEWS
Shares in Springer Nature opened at 24 euros in its initial public offering in Frankfurt on Oct. 4, 6.7% above where the stock priced.
The German academic publisher had set the final offer price for the shares in the upper half of the price range at 22.5 euros, which corresponds to a stock market value of around 4.5 billion euros.
The company last tried to go public in the first half of 2020 before shelving the plan in October that year citing uncertainty around Covid-19.
Graphic: IPOs have been broadly lagging stock markets https://reut.rs/3Y7ktr0
Editing by Aimee Donnellan and Oliver Taslic
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