Ireland could sell more AIB shares after oversubscribed IPO

Padraic Halpin

DUBLIN (Reuters) - Ireland could sell more shares in Allied Irish (AIB) (ALBK.I) (ALBK.L) after an oversubscribed initial public offering (IPO) left large funds keen to buy more, the ’s chief executive said on Tuesday. Shares in the majority state-owned lender opened 8 percent higher on its return to the main Irish stock exchange on Tuesday after the government sold a quarter of the bank it nationalised almost a decade ago in a 3 billion euro ($3.4 billion) listing. Ireland’s finance minister said following the sale that he could review a pledge to sell a maximum of 25 percent in any of its bank shareholdings by the end of 2018 after AIB hit that limit. “The opportunity is now stronger. It’s like all these things, never miss an opportunity if it’s there, at the moment the one thing the government do know is there is demand,” AIB CEO Bernard Byrne told Reuters in a telephone interview. Ultimately it’s their decision but the one thing that has become more obvious is there is lots of demand right now and the Irish story works right now. Those things don’t always exists so if you wait for the perfect time, the market may not be there. The market is there right now.” Byrne said investors liked the bank’s business model, Ireland’s fast growing economy and the fact that AIB would have excess capital available over the next two or three years. Shares in the third largest European bank IPO since the financial crisis were over four times oversubscribed when they were sold last week. They were trading at 4.73 euros by 0815 GMT, 7.5 percent above the listing price of 4.40 euros. The size of the IPO is set to rise to 28.75 percent after the government included a greenshoe, or over-allotment, option. The limit on share sales allowed for such an option to nudge it slightly above 25 percent. The IPO was dominated by institutions happy to take a long-term view of the bank which Byrne said meant the shareholder base was broadly dispersed with very few of sufficient scale that they would have to declare the size of their shareholding. “A lot of large funds have a good position, not a concentrated position. They have further to go,” he said. He said shareholders had to form their own view on how much capital could be returned to them but added that the bank, which is generating capital each year, plans to return its core tier one capital ratio to 13 percent from the current level of 16 percent once it normalises its stock of non-performing loans. The Irish government plans to use the proceeds to cut some 1.5 percent from a national debt that at 200 billion euros is still among the highest in the euro zone by most measures.

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Pirelli aims for €8bn valuation in stock market return

ChemChina will sell down shareholding under 50 per cent in a test of investor appetite for European IPOs

SEPTEMBER 14, 2017

Italian tyremaker is aiming to relist in next month with an equity valuation of more than €8bn in what is set to be one of the biggest initial public offerings in Europe so far this year.The return to the public market of Pirelli, which makes tyres for Formula One cars, is seen by analysts as a test not only of investor appetite for European companies but also of sentiment towards Chinese owners of European brands. The 145- year-old Pirelli, one of Europe’s best-known industrial brands, is owned by state-controlled ChemChina, which led a €7.3bn takeover and delisting of Pirelli two years ago in one of the most high-profile acquisitions by Chinese groups in Europe.In a statement published on Thursday evening, Pirelli gave an indicative price of €6.3 to €8.3 per share for the flotation. The company, where veteran industrialist Marco Tronchetti Provera has been chief executive since 1992, will list up to 40 per cent of its shares. The roadshow will begin on Monday, with the listing due to take place in the first week of October, say people informed of the decision.

The group coming back to Milan’s stock exchange includes only Pirelli’s high-end tyre business, which has gained it the sobriquet the “Prada of tyres”. As part of the ChemChina takeover, Pirelli spun off its industrial truck business with ChemChina’s industrial tyre business. Pirelli still owns its eponymous calendar and the HangarBicocca, a vast art installation space built near its headquarters in Milan.Pirelli’s indicative price implies a trading multiple in line with Finnish tyremaker Nokian, which is best known for its high-end winter tyres, but more expensive than other rivals Michelin, Continental and Goodyear, said analysts.Nokian trades at an enterprise value, which includes debt, of about 11.3 times expected earnings before interest, tax, depreciation and amortisation, according to data compiled by Bloomberg. Michelin, Continental and Goodyear trade at around six times enterprise value to Ebitda, according to industry analysts.The event is seen by analysts as a test of Chinese ownership of European companies. Pirelli surprised analysts last month after announcing new governance rules would come into force at the time of the listing which would see ChemChina giving up “management and co-ordination activity” of Pirelli.In a statement, Pirelli said this means “that in the future Pirelli shall take its own resolutions autonomously and independently without the obligation to conform to resolutions taken by any of its parent companies”. ChemChina will reduce its stake to under 50 per cent. Mr Tronchetti Provera, 69, will remain as chief executive until mid-2020 and will be key in choosing his successor, the group said.Pirelli’s return will provide a boost for Milan’s stock exchange, which is promoting itself as a hub for high-end consumer goods after recent listings by Technogym, Brunello Cucinelli and Salvatore Ferragamo.The listing has wider implications for corporate . The event will help trigger the end of a shareholder pact at , the Milanese investment bank which has been one of Italy’s most significant power brokers at the centre of a web of cross shareholdings. Mediobanca has been selling its strategic stakes since 2013, and exited its shareholding in Pirelli at the time of the ChemChina acquisition. With the relisting Pirelli will also quit its shareholding in Mediobanca, and Mr Tronchetti Provera will also give up his board seat at Mediobanca where he has been vice-chairman.

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Fund investors deflate tyremaker Pirelli's IPO price hopes

Maria Pia Quaglia, Elisa Anzolin, Simon Jessop

SEPTEMBER 14, 2017 / 5:10 PM /

MILAN/LONDON (Reuters) - Tyremaker Pirelli has given up on what sources say was an initial valuation goal of 9 billion euros (8.00 billion pounds) ahead of its return to Milan’s stock market next month, after several fund managers baulked at paying such a lofty price. The maker of Formula 1 racing tyres said on Thursday its owners would sell up to 40 percent of the company within a price range of 6.30-8.30 euros per share, giving it a valuation of between 6.3 billion and 8.3 billion euros. Controlling shareholder China National Chemical Corporation (ChemChina), which took over Pirelli two years ago and delisted it, and two other shareholders had been looking for a premium valuation of up to 9 billion euros, sources familiar with the matter have said. However, fund managers raised doubts, citing Pirelli’s relatively high debt, complex governance structure and risk that the share price could be hit by a wave of selling once a lock-up period for one of the existing minority shareholders expires. At the top of Pirelli’s price range, ChemChina and the two minority shareholders will raise up to 3.3 billion euros in the IPO, assuming Pirelli’s bankers take an over-allotment. That would make it Europe’s second largest offer this year behind the 3.4 billion euros raised by (ALBK.I) in June. The price range represents a multiple of 11.3-14.9 times Pirelli’s forecast 2018 earnings, according to estimates published by Banca IMI, a global coordinator for the IPO. Banca IMI valued Pirelli at between 7.6 billion and 8.7 billion euros. But four Italian fund managers said the group was worth 6.6 billion to 7.5 billion euros, or 11.9- 13.5 times 2018 earnings. That would put Pirelli above rival tyremakers Michelin (MICP.PA) and Continental (CONG.DE) but short of the industry’s most highly valued manufacturer, Finland’s Nokian (NRE1V.HE). Angelo Meda, head of equities and portfolio manager at Banor SIM, which manages 4.8 billion euros in assets, trimmed his maximum valuation after the price range was released. “I am not going to buy it if it’s valued at more than 7 billion euros,” he said. One large London-based investor who has looked at Pirelli’s offer said the group was a good business but questioned whether it deserved a premium valuation. Pirelli declined to comment. Giacomo Tilotta, portfolio manager at AcomeA SGR, also cut his valuation, saying Pirella was attractive at around 6.6-7.0 billion euros compared with 7.0-7.5 billion euros previously. He said debt was the main reason why the company should not carry a hefty premium over peers. Pirelli’s net debt is 3.1 times estimated 2017 core earnings, compared with 0.8 times for Michelin in the first half of 2017, while Nokian is cash positive.

VALUATION DEBATE

Pirelli, established in 1872 and one of Italy’s best-known corporate names, said it would list in the first half of next month. It is expected to set a listing date of Oct. 4. The company markets itself as a premium tyremaker focussing on upmarket consumer tyres. The group’s less profitable truck and industrial tyre business is being retained by ChemChina. Banca IMI said in a study that Pirelli warranted a valuation above its direct peers’ average 2018 earnings multiple of 11.1, citing its “superior financial profile and higher expected earnings growth”. Shares in rivals Continental and Michelin sell on a 2018 earnings multiple of around 11, according to Banca IMI. High-end winter-tyre manufacturer Nokian Tyres (NRE1V.HE) commands 15.7. “Pirelli is at the forefront of a trend for fitting vehicles with larger and larger tyres, but it’s not a protected niche,” said the London-based investor. “Other tyremakers are making in-roads into this market, which might erode its profit margins as competition heats up,” the investor added. A person familiar with the matter said more than 700 potential investors in Europe, Britain and the United States had expressed an interest in the IPO, which is being marketed by nine Italian and foreign investment banks, led by global coordinators Banca IMI, JP Morgan and . State-owned ChemChina holds 65 percent of Pirelli’s sole shareholder, Italy-based Marco Polo, through a Luxembourg-based firm. Pirelli boss Marco Tronchetti Provera and banks (CRDI.MI) and (ISP.MI) hold around 22 percent of Marco Polo via a holding company. The rest is held by investment fund LTI, linked to Russia’s Rosneft (ROSN.MM), which has a lock-up period of 180 days after the IPO. The person familiar with the matter said Rosneft had never said it would sell out, while another source close to the deal said Rosneft’s post-IPO stake would be small. ChemChina will remain the biggest shareholder after the IPO, with around 40 percent, though Pirelli has said most of its directors will be independent and that Tronchetti Provera will play a key role in picking his successor in 2020. Banca IMI gave Pirelli an enterprise value

Page 3 of 6 © 2017 Factiva, Inc. All rights reserved. of up to 12 billion euros, including net debt of 3.36 billion euros. Two years ago, when ChemChina bought the business and delisted it, Pirelli had an enterprise value of roughly 8.3 billion euros, though that included the industrial tyre division. “Now that the company is a bit smaller they are seeking an enterprise value of up to 12 billion. That’s too much,” said Meda.

BLOOMBERG

Pirelli Is Said to See $10.8 Billion Value in IPO Matching Peers

By Tommaso Ebhardt , Ruth David , and Daniele Lepido

September 13, 2017, 1:16 PM GMT+2

Pirelli & C. SpA , the tire maker that supplies Formula One race cars, is seeking an equity valuation of as much as 9 billion euros ($10.8 billion) in its initial public offering, implying a trading multiple in line with Finnish peer Nokian Renkaat Oyj, people familiar with the matter said. The Italian company will present details of its IPO, including a price range, as early as this week and plans to begin trading in Milan in the first week of October, said the people, who asked not to be identified as the details are private. The company has received strong demand from investors and is in talks with larger funds interested in becoming anchor investors for the deal, they said. If it achieves a similar value to Nokian, Pirelli could become the largest IPO in Europe this year, potentially surpassing the 3 billion euro sale of Allied Irish Banks Plc shares in May. Pirelli has said it’s planning to sell a 40 percent stake in the listing next month. Nokian trades at an enterprise value, which includes debt, of about 11.3-times expected 2017 earnings before interest, tax, depreciation and amortization, according to data compiled by Bloomberg. Pirelli reported first-half adjusted Ebitda of 546.4 million euros. As part of a Chinese-led takeover in 2015, Pirelli combined its industrial truck business with ChemChina’s tire unit to focus on high-end tires for consumer vehicles and to boost profit margins. Pirelli may also encourage investors to value the firm at comparable levels to other luxury Italian companies, such as handbag maker Salvatore Ferragamo SpA and apparel firm Moncler SpA, one of the people said. A representative for Pirelli declined to comment. A group led by China National Chemical Corp. bought Pirelli for about 7.4 billion euros in 2015, delisting the firm after nine decades on the stock exchange. The Chinese company and its partners plan to reduce their holding from 65 percent to below 50 percent in the IPO. Pirelli Chief Executive Officer Marco Tronchetti Provera will stay at the helm of the firm, which makes tires for luxury auto brands including , McLaren and Bentley, until mid-2020 and will have a leading role in choosing his successor, the company has said.

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Rovio undershoots expectations with €900m valuation

Stock market listing set to price Angry Birds maker well below recent €2bn estimate

SEPTEMBER 14, 2017

Rovio, the company behind Angry Birds, is set to be valued at between €800m-€900m in a stock market listing, significantly below recent estimates of its potential valuation. Existing Rovio investors — led by former chairman Kaj Hed’s investment vehicle — are looking to sell about 40m shares, including an overallotment option, at €10.25-€11.50 each. Rovio is also seeking to raise about €30m itself by selling new shares. Together, as much as 55 per cent of the company could be sold, valued at €438m-€488m. That would leave Trema, Mr Hed’s investment company, with a shareholding of about 37 per cent of a company with a maximum valuation of about €900m. However, this would leave the value of Rovio far below suggestions from people close to the process that it could expect up to $2bn through the listing as recently as last month. The flotation of the Finnish company is another test of market appetite for mobile gaming companies, given wider questions about the sustainability of long-term business models in the sector after the travails of King Digital and Zynga, the makers of Candy Crush Saga and FarmVille respectively.Mobile game makers have to deal with sudden shifts in consumer behaviour as well as the difficulty of following up hit games. Both have hurt Rovio, which was valued at as much as $9bn in 2011 as Angry Birds became the most downloaded mobile game in history. Since then, Rovio was thrown into crisis as paid-for games lost their appeal with people flocking to so-called freemium apps that provided most of the game for free with add-ons and short-cuts costing money.

Rovio has also struggled to show there is life beyond Angry Birds with a number of gaming flops, and it was forced to abandon ambitions to become a Disney of the gaming world with interests in everything from theme parks to education. But the Finnish company has been saved by its big bet on the success of The Angry Birds Movie, which made $350m at the box office and with a sequel to follow. Revenues in the first half of this year almost doubled from a year earlier to €153m while net profits rose to €13m from €4m. Investors such as Robur, Skandia and Danske Invest have pledged to become cornerstone shareholders in the offering, buying 20m shares. The subscription period for Rovio shares will begin on Monday next week, with first trading expected by about September 29. “The listing is an important step in developing Rovio into an even stronger games-first entertainment company,” said Kati Levoranta, chief executive. Mika Ihamuotila, Rovio’s chairman, said: “The Angry Birds brand has very strong brand awareness globally. We feel that strong brand is one of the key competitive advantages in the gaming market of the future.”

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Spain Unicaja Raises $783 Million in IPO to Repay State Aid By Esteban Duarte and Macarena Munoz Montijano

June 28, 2017

Unicaja Banco SA raised about 688 million euros ($783 million) in an initial public offering that turned into a test of confidence in Spanish banks after this month’s demise of a larger lender. Unicaja, based in the southern city of Malaga, priced the sale of 40.3 percent of its equity at 1.10 euros per share, the low end of the 1.10- 1.40-euro range set earlier this month, it said in a regulatory filing. The stock will start trading June 30. Analysts had questioned whether Unicaja would pursue the listing after SA took over a tottering Banco Popular Espanol SA this month in a fire sale arranged by European regulators. Days later, the Spanish securities regulator banned short-selling in Liberbank SA, whose shares had plunged on contagion from Popular’s turmoil. Liberbank was the last Spanish banking IPO, in 2013. Unicaja will trade at a price-to-book ratio of 0.4 to 0.45, according to Nicolas Lopez, head of research at Mercados y Gestion de Valores. “That valuation shows that the market stills sees with skepticism the potential of smaller banks in a world of low interest rates and digitalization,” he said. “The latest events in the Spanish banking industry may have also affected the valuation of Unicaja, as investors differentiate between large, well-managed banks and former saving lenders that are still dealing with real-estate issues.” The transaction will give Unicaja a market value of 1.7 billion euros, excluding the effect of a potential greenshoe option. Proceeds will be used to repay about 604 million euros of contingent convertible securities the bank inherited from a nationalized lender acquired in 2014. Unicaja has until April 2018 to repay those securities.

Balance Sheet

Unicaja’s share sale is another milestone in the reorganization of a sector upended by a property bust that resulted in a raft of bailouts five years ago. SA, Spain’s largest state-owned bank, agreed Tuesday to acquire Banco Mare Nostrum SA in an all-stock deal enabling the government to proceed with plans to sell its stake in the rescued lenders. Unicaja has a more robust balance sheet than some of its peers, with less real estate exposure and a stronger capital position, Renta 4 analyst Nuria Alvarez said earlier this month. Its capital ratio -- a measure of financial strength -- stood at 11.8 percent as of December, while Popular’s ratio was 8.17 percent. The coverage ratio for foreclosed assets at Unicaja as of December was 62 percent, compared with Liberbank’s 43 percent in March. Morgan Stanley and UBS Group AG were global coordinators and bookrunners on the sale. A former savings bank, Unicaja has 57 billion euros in assets and 1,300 branches. It is mainly owned by Fundacion Bancaria Unicaja, a nonprofit organization that uses dividends from the bank to fund charitable work. The lender reported a 135 million-euro profit in 2016.

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