Equity funding in Germany
2nd ANNUAL IFR EQUITY CAPITAL CONFERENCE
12 November 2010
Analysis of German ECM deal flow
German ECM market in Western Europe (2010 YTD)
German ECM transactions split by type (2010 YTD)
Rest of W. Europe
20%
Equity Linked 2% Capital Increase 3%
Secondary Placing 10%
Scandinavia
14%
Germany
22%
UK
27%
Italy
10%
IPO 11%
France
7%
Rights Issue 74%
Comparison of German ECM products 2009 and 2010 (by volume)
2009
2010
74%
23.0
13.8
57%
20%
19%
2%
Total (bn €)
Equity Linked
4%
12%
10%
3%
Capital Increase
0%
Secondary Placing
IPO
Rights Issue
Germany is a strong “European ECM country”; rights issue dominate activity in 2010
Source: Dealogic
1
German ECM volumes driven by balance sheet restructuring
German Primary Issues 2010 YTD
Driven by capital intensive industries
Industry Split*
Utility & Energy 2%
Other 2%
Financial 4%
Real Estate /
Construction 5%
Healthcare 8%
Case Study: Heidelberger Druckmaschinen
Type of offering: Rights Issue
Transaction volume: €419.3m
Subscription ratio: 2 new : 1 old
30.2% discount to TERP
Autos /
Industrials 69%
Structural industry decline
Electronic 11%
Share Price Development
30
25
20
15
10
5
0
2007
2008
Rescue Rights Issue
2009
2010
Net debt/EBITDA 2011 pre: 3.2x
Use of proceeds: Repay credit lines
Geographical split of investors
contacted by Commerzbank
Germany
12%
Use of Proceeds*
General Corp. Purposes 4%
International
88%
Acquisitions 6%
Investors
contacted by Commerzbank
New Investors
79%
Existing
shareholders
21%
Growth 7%
Repay debt /
Restructuring
84%
Heavy rights trading
Over 80% of rights were recycled
Net debt/EBITDA 2011 post: 2.7x
99.85% take-up ratio
Pressure for shareholders to follow their money but significant support required from new investors
Source: Dealogic. * Based on Size of transaction - Below EUR5bn (excludes Deutsche Bank rights issue)
2
Investor preference for de-risked opportunities (1)
Brenntag
IPO – 29 Mar 2010: €747.5m
Estimated demand
Germany
5%
Price €50 (just below mid-point of €46 - €56 range)
Share Price Development
70
Placement
70% primary and 30% secondary shares
65
29% free float after the IPO
10 days investor education, 9 days bookbuilding
60
Books ~ 3 - 4x covered
Placing price
Discount to fair value
IPO price: 15.7%
Price range: 5.6% - 22.4%
International
95%
55
IPO price
50
Secondary – 1 Oct 2010: €668m
Estimated demand
Germany
15%
Price €60.75
Discount to previous close 0.4%
Premium to IPO price 21.5%
Speed: overnight accelerated bookbuilding
Jun- Aug10
10
Sep- Nov10
10
Premium to IPO price 21.5%
258 days trading
Transaction represented 73.5% of pre-deal free float
45
Mar- May10
10
2 corporate results
announcements since IPO
International
85%
6 months trading history
IPO market still not fully-functioning relative to market opportunities for listed companies
Source: Dealogic, IFR, Commerzbank
3
Investor preference for de-risked opportunities (2)
Kabel Deutschland
IPO – 19 Mar 2010: €660m
Estimated demand
Germany
2%
Price €22 (low end of €21.50 - €25.50 range)
Share Price Development
35
100% secondary shares
Placement
38% free float after the IPO
10 days investor education, 9 days bookbuilding
30
Books ~ 1 - 2x covered
Discounts to fair value
IPO price: 20.1%
Price range: 7.4% - 21.9%
Secondary – 30 Sep 2010: €413m
Placing price
International
98%
25
IPO price
Estimated demand
Germany
10%
Price €27.50
Discount to previous close 3.8%
20
Mar- May10
10
Jun10
Aug- Sep- Nov10
10
10
Premium to IPO price 25%
Premium to IPO price 25%
100 days trading
2 corporate results
announcements since IPO
Transaction represented 50% of pre-deal free float
Speed: overnight accelerated bookbuilding
International
90%
6 months trading history
IPO market still not fully-functioning relative to market opportunities for listed companies
Source: Dealogic, IFR, Commerzbank
4
How “German” is the German IPO market?
DAX (top 30 listed companies)
MDAX (next 50 listed companies)
Holdings by investor country
RoW 13%
Benelux 4%
Holdings by investor country
RoW 3%
Germany
38%
RoE 18%
Germany
29%
Norway 6%
France 6%
France 9%
US 25%
US 21%
IPOs raising > €500m
IPOs raising €100m - €500m
Investors by country (Commerzbank estimates)
Investors by country (Commerzbank estimates)
Germany
20–25%
Germany
10–15%
International
85–90%
UK 19%
UK 9%
International
75–80%
Significant international presence in Index stocks magnified in ECM transactions
Source: Dealogic, Commerzbank
5
Why are German investors less prominent in German deals?
Possible reasons for the market dynamic
High concentration in German fund management: the top 10 funds manage 75% of equity AuM
Low relative equity assets: German equity funds total USD 123bn (44% of assets invested) vs. UK equity fonds
of USD 417bn (61% of assets invested)*
Dispersion
of AuM
insufficient domestic depth alone, with a well-covered deal requiring 20-30 'power investors'
Large and growing universe of high-value investors located in London and New York (both long and hedge)
with funds targeting opportunities in Germany
stock selection based on sector, market value or style (also region but rarely country)
ABBs require speedy decision-making; IPOs require intensive education and model-building
the largest funds have both the resources (manpower and uninvested capital) and internal processes to place gamechanging orders quickly
Speed
Investment banks (whether on risk or not) are motivated to build early momentum for best execution
focus early attention on investors that can make a difference; supplement with long-tail to maximise price tension
Pilot-fishing and other test marketing also give the largest investors an added timing advantage
* Source: European Fund and Asset Management Association (EFAMA), Q2 2010
6
Selling “Germany” to the world requires an international platform
Commerzbank’s distribution platform
Investor Relations focus at side Germany
German
Investment Seminar
New York
3 dedicated equity sales hubs
Frankfurt
New York
London
100 Research specialists including more than 30 equity analysts
covering over 200 stocks (100% of DAX and MDAX)
87% of DAX
represented
at CEO/CFO
level
(Jan 2011)
German Mid Cap Day
London
120 corporate
roadshows in the
last 12 months
German Mid Cap Day
New York
#1 for Germany Country Analysis – Extel Surveys 2010
Research organised into German focus-sectors
European
core sectors
German
core sectors
Automotive
Construction
Chemicals
Financials
Power & Utilities
Large Caps
Life Science
Mid-Caps
Steel &
Capital Goods
Real Estate
TMT
Consumer /
Retail
Transport &
Logistics
Utilities
Commerzbank ECM track-record in 2010
Mid-Caps
Our platform delivers “German insight” from German sectors on a global basis
7
Ute Gerbaulet
Global Head of Equity Capital Markets
Phone
+49 69 136 22974
Mail
ute.gerbaulet@commerzbank.com
Dan Oakes
Head of International ECM Origination
Phone
+44 20 136 7475 3802
Mail
daniel.oakes@commerzbank.com
Headquarter
Kaiserplatz
Frankfurt am Main
Germany
www.commerzbank.de
Postanschrift:
60261 Frankfurt am Main
Phone +49 (0)69 / 136-20
Mail
info@commerzbank.com