The hit IPO, which was 18 times oversubscribed, came just a week after the Eu1bn flotation of French electrical fittings company Legrand was 30 times oversubscribed. The greenshoe for Legrand's deal was exercised this week.
Bookrunners Morgan Stanley and UBS priced the Wacker Chemie sale at the top of the Eu70-Eu80 price range, giving the company a market capitalisation of almost Eu4bn.
Davina Curley, head of F&C Asset Management's Continental European High Alpha Fund, based in London, said the high levels of oversubscription for Wacker Chemie and Legrand indicated that investors might be "getting carried away".
"The market is incredibly buoyant at the moment and a large part of that rubbed off on these deals," she said. "Undoubtedly, both Wacker and Legrand have strong fundamentals, but the market should be aware and concerned about overexuberance. Interest rates and earning disappointments remain a real threat."
But bankers involved in the deals denied that an IPO bubble was developing, as some observers have suggested this week.
An equity syndicate banker at one of Wacker Chemie's bookrunners said European IPOs had gained an average of 13.6% on their first day of trading during the first quarter of the year — just 2% higher than the average for the past five years.
Moreover, the banker said that investors were still fussy about what they would buy.
"Wacker was a success because it is highly respected and well managed," he said. "Legrand was a similar story: it was an excellent company that people knew well, as it had been listed before, and which came at a discount to its peers.
"The strong demand for both says little about investors' readiness to pay up for anything," he added. "There is more differentiation between companies by investors than ever before. No one is getting carried away by IPO excitement, for sure."
The banker said several deals had recently been postponed — such as UBS's Eu1bn IPO for Spanish property group Parquesol — suggesting that investors will reject stories they are not comfortable with.
Specific attractions
The Wacker Chemie deal's success enabled Morgan Stanley and UBS to exercise the 1.96m share greenshoe, comprising 1.18m shares owned by the Wacker family vehicle Blue Elephant Holding and 776,973 shares issued by the company on Tuesday.
Wacker Chemie sold a total of 4.57m treasury shares in the base deal, while Blue Elephant Holding and other shareholders including Morgan Stanley sold 8.47m existing shares.
Wacker Chemie had several characteristics that attracted investors to its IPO, according to the banker.
"Investors loved that it had a polysilicon business, which linked it to the solar panel business," he said. "Of course, solar power has been a huge story for investors in the past year."
IPOs for solar power-related companies such as Conergy in March 2005 and Q-Cells in September were huge hits.
Wacker Chemie intends to use the Eu428m raised in the IPO to expand its facilities in China and build a new plant to produce polysilicon, which is used to make computer chips and solar cells.
The company also makes chemicals used in the construction, textile, pharmaceutical, cosmetics, agriculture and tobacco industries.
The banker said the one shadow that could have hung over Wacker Chemie's IPO was the failed Eu1.09bn float of its Wacker Siltronic silicon wafer unit in March 2004, which the company pulled.
"To our amazement, it was not even mentioned during the [marketing for this] deal," he said. "To be fair, the company has undergone a significant reorganisation since the attempt was made to IPO Siltronic. Moreover, the beneficial synergies between Wacker's various units and Siltronic are now much clearer."
Silicon is a scarce resource and being in the markets for both silicon and hyperpure silicon, which is used in semiconductors, is a competitive advantage for Wacker, as it has a guaranteed supply.
One of the most notable achievements of Wacker Chemie's IPO was the strong retail interest it generated. A fifth of the shares were sold to retail investors, making it the most successful retail offer in Germany for many years, according to the banker.
"It was a phenomenal result," he said. "And perhaps almost as impressive was the fact that the German media supported the float, instead of ripping it apart as they usually do."
The company has a freefloat of 28.75% after the exercise of the greenshoe. The Alexander Wacker Familiengesellschaft trust owns 55.64% of Wacker Chemie, Blue Elephant Holding owns 10.8% and Wacker Chemie itself has 4.74%.
Yesterday (Wednesday) the stock closed at Eu94.55 in Frankfurt.
Laurence Neville
RUSSIA
Nomura and domestic brokerage Uralsib sold a $145m pre-IPO convertible bond for Angara Mining this week. Angara is the parent company of Vasilevsky Rudnik Gold Mine in Siberia.
The two year bond more closely resembled a regular CB than a normal pre-IPO bond, as it is convertible into shares rather than offering a discount to the IPO price.
The reason for using the bond was to limit the amount of equity the company had to give away, according to a banker at Nomura in London. "Furthermore, it enables the company to raise debt capital at roughly half the cost of straight debt," he said. The bond pays a coupon of 7%.
The company is expected to list in London within 15 months. If a listing does not take place, investors can simply redeem the bonds for cash.
The issue was placed with just five buyers, described as a mixture of emerging market, natural resources and dedicated convertible buyers. Most public equity funds can hold up to 10% of their funds in unlisted stocks, provided they are expected to be listed within 24 months.
Air transport group Volga-Dnepr Group has announced its intention to list in 2007.
The company said it would float up to 25% of its share capital on the RTS, Micex and London Stock Exchange. The company will appoint bookrunners shortly.
State-owned Vneshtorgbank hopes to come to market in the coming months to recapitalise its balance sheet.
The company will submit proposals for the IPO to the government later this month and could list in the autumn.
TURKEY
As EuroWeek went to press, Deutsche Bank and Turkish brokerage Bender Securities had yet to price the $120m-$146m IPO of Vestel White Goods.
A total of 52m new shares plus a greenshoe of 7.8m existing shares sold by parent company Vestel Electronics are on offer at TL3.12-TL3.78, giving the company a valuation of $440m-$533m.
VWG will have a freefloat of 27.4% after the IPO. Vestel Electronics owns 35% of VWG's total shares but will buy out all other shareholders at the IPO price as part of the deal.
Turkey's number three mobile telecoms company Avea this week announced that it intended to list with two years.
UK
Deutsche Bank and UBS completed a £210m placing for brewer Scottish & Newcastle on Tuesday.
The deal will part-finance its acquisition of the Foster's brand in Europe, Russia and eight east European countries for around £309m. The 42m shares were sold at 500p, compared to a closing price of 506.5p on Tuesday. Yesterday the stock closed at 516bp.
