Germany’s largest stock market flotation in two years is battling for survival.
Construction group Hochtief has failed to generate the expected level of investor appetite for the IPO of its infrastructure arm, as the offer deadline closed on Thursday.
The group’s management is currently locked in talks after learning the order book for Hochtief Concessions was only three quarters filled, people close to the company and its banking consortium said. If the flotation is pulled it would deal a hammer blow to the European IPO market, which has gradually opened following a long drought period in the wake of the financial and economic crisis.
The planned €1bn issue is the largest German initial public offering since the onset of the global financial crisis and has been billed as a significant test of investor appetite ahead an expected wave of IPOs in 2010.
“No decision has been taken yet, the management is still debating whether to cancel the flotation,” one company insider told Alphaville.
Another option Hochtief could take would be to sell a smaller stake of the company to the investors already committed to the deal.
Hochtief had set a price range of €24 to €29 per share, but its advisors – Citigroup, Deutsche Bank, Goldman Sachs and Barclays Capital — were unable to generate the level of investor interest expected when the flotation was announced.
The offering has been impacted by debt crisis in Dubai, which triggered turmoil at global equity markets and made investors wary about infrastructure assets.
But one banker said that Hochtief’s price range might also have been too ambitious. “There has been much debate among investors about the pricing of the IPO,” he said.
The German construction group, the country’s largest, and its advisers all declined to comment.
Hochtief’s infrastructure group had said it intended to up to €600m of new shares, with its parent company making up to €400m while retaining a stake of at least 51 per cent.
The group is one of the biggest privately owned airport operators in the world. It runs airports in Athens, Budapest, Düsseldorf, Hamburg and Tirana in Europe, and in Sydney, Australia.
A cancellation of the IPO would come as a large blow to Hochtief’s management, which wanted to float the unit in a move to unlock Hochtief’s hidden value by increasing its transparency.
Hochtief’s market capitalisation is expected to be the same as its 55 per cent stake in Leighton, a leading Australian construction group that is listed in Sidney.
Reporting by Miles Johnson in London and Daniel Schäfer in Munich
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Hochtief infrastructure listing bucks trend – FT