French commercial vehicle hire company Fraikin is confident that its mixture of robust cashflow and strong growth will draw investors to its Eu450.9m-Eu520.7m Euronext Paris IPO, which was launched this week.
The Calyon and Deutsche Bank-led deal will provide a partial exit for investment company Eurazeo, which took the company private in 2000. No new shares will be sold in the IPO.
"The company has always had a robust and strong model with high cashflow," said Olivier de la Morinière, chairman and CEO of Fraikin Group, in an interview with EuroWeek.
"Then three years ago we launched a growth strategy that has resulted in Fraikin becoming more diversified and active in areas such as large trucks and commercial vans."
De la Morinière said the dependable cashflow of the business, combined with the growth strategy, had been well received by investors during roadshows.
Fraikin has a fleet of 53,000 vehicles. It is by far the largest company in its sector in France and is also number one in Spain. It is the third largest player in the UK market.
The commercial vehicle hire market has grown at around 4.9% this year, with growth of 4.4% expected in 2007, according to de la Morinière.
"Transportation of goods is an increasing trend — not least because of the increasing volumes of goods produced in markets such as China that then require distribution," he said.
"That growth in transportation requirements is being combined with an increased emphasis on outsourcing," he said. The rate of outsourcing in France, Fraikin's largest market, is just half that of the UK, said de la Morinière. "We believe outsourcing will grow to match that level and Fraikin will benefit from the growth."
During the first six months of 2006, Fraikin's revenues grew 9% in France, according to de la Morinière.
Eurazeo currently owns 54.8% of Fraikin and will reduce its stake to around 14% in the IPO. "It has a policy of turning its assets regularly," explained de la Morinière. "This sale will offer it liquidity and a chance to realise a return on its investment."
Other shareholders — including investment groups Rhône Group, which owns 19%, Pragma, which holds 13.75%, West LB, which has 9.79% — and management, including de la Morinière, will also sell shares in the IPO. The freefloat of the listed company is expected to be around 60%.
Although no new shares will be sold in the IPO, Fraikin will gain flexibility to raise funds in the future, said de la Morinière.
A total of 32m shares are offered at Eu14-Eu16.25. There is a greenshoe of 4.8m shares. The deal will close on December 7 with trading beginning the following day.