Biggest European IPO In Two Years Cancelled After Major Valuation Disconnect

Farewell IPO window. European construction company Hochtief was forced to cancel the IPO of its concessions business once investors became unwilling to pay more than €20 for the new shares, with the bottom of the range at €24 previously. Furthermore, according to market participants, the company was able to only fill half a book, after management disclosed during a roadshow lunch that the Dubai jitters made finding investors complicated. Watch for some material downside to the stock when it opens in Europe tomorrow.

Some observations from Reuters:

FRANKFURT/LONDON, Dec 3 (Reuters) - Plans for Germany's biggest IPO in two years still hung in the balance as builder Hochtief tried to lure investors to its concessions unit with less than an hour to go before it shuts the order book.

Sources close to the transaction said there was no final decision on whether to go ahead with the deal. Traders and bankers pointed to a muted response from investors.

Hochtief plans to raise 882 million euros to 1.005 billion euros ($1.33-$1.52 billion) in gross proceeds from the listing and related steps.

Investors were subscribing to shares early on Thursday at 24-25 euros per share, near the low end of the 24-29 euro range set by parent Hochtief, sources close to the IPO said. [Zero Hedge has learned this number subsequently dropped to €20/share].

"I think that gaining the confidence of investors for their highly complicated business has been a hard task for (Hochtief) management," said Arne Menzel, analyst at LBBW.

He said making the matter more difficult was the fact that most of Concessions' holdings were minority stakes, many in companies whose results have been volatile.

A Frankfurt-based analyst who did not want to be named said the group's stake in the Budapest airport was one of the holdings most difficult to evaluate.

"There aren't any good forecasts for the airport, projected traffic figures and the like...The future of the airport will depend on the growth outlook for eastern Europe, which looks muted at the moment," the analyst said.

In addition to a 37.25 percent stake in the Budapest airport, the unit also hold stakes in several construction projects and smaller real estate management operations.

Credit Suise analysts Ur-cheng Leong and Robert Crimes pointed out in a note to clients that the few quoted infrastructure peers who publish NAVs -- including Macquarie Infrastructure Group, MAp Airport, Australia Infrastructure Fund (AIX) and Cintra -- trade at a much heftier 28-47 percent discount to their NAV.

"Investors are price sensitive, no question about that," the person added.

The IPO's bookrunners -- which include Goldman Sachs, Citigroup, Deutsche Bank and Barclays -- would not comment on the book coverage.

Hochtief plans to close the book and price the deal late on Thursday as planned, people close to the IPO said.

NO FLEXIBILITY ON PRICE

A Hochtief spokesman said on Wednesday the company was not considering lowering the price for its IPO, pointing to comments from CEO Herbert Luetkestratkoetter over the weekend that the company reserves the right to put the listing on hold.

After the Hochtief stock plunges shortly, it may be time for Oleg Deripaska to raise a few hundred billion from underwriter Goldman (courtesy of an oil futures collateralized convertible DIP financing and Goldman's very bullish outlook on commodities yet again, as we presented earlier), and go chase the company which he has had a hard on for so long (except those times in late 2008 when he was bankrupt, of course).

h/t ramo