The IPO of Galderma, the Swiss skincare company, remains unlikely to happen before 2024, according to sources close to the deal, unless there is a dramatic improvement in the IPO market over the coming months.
The jumbo flotation of Nestle’s former skincare division on the SIX Swiss Exchange has been repeatedly pushed back over the past 18 months, as volatility battered Europe’s fragile IPO market, despite Galderma being widely regarded as one of the strongest companies in the pipeline.
Swedish private equity group EQT acquired Galderma from Nestle in 2019.
Galderma’s IPO is expected to raise at least €3bn, making it one of the biggest European stockmarket listings in recent years.
“It is a terrific asset and I have no doubt that it will come to market at some stage,” said a source close to the IPO. “They are ready to go whenever they are ready to go. It is another example of a super high-quality business that does not need to do an IPO and is not in a rush. They will not be beholden to a deadline and understandably everyone wants to wait until the market is in a better place.”
The size of the quantum, which is likely to include a meaningful primary capital raising to finance deleveraging, means that Galderma will need substantial participation from long-only investors and cornerstones to get its IPO across the line.
“It is for EQT to decide but we are still looking at a patchy IPO market, so they are not in a rush,” said a second source close to Galderma. “I would say it is for 2024 while retaining optionality to look at 2023 if the market dramatically improves. They are fully prepared for an IPO so it would not take long to restart the process. The Swiss market allows them to be swift, but if I was them I would be looking at 2024 instead of 2023.”
The company’s lack of faith in the current IPO market was apparent at the end of June when Galderma announced that it had raised $1bn of primary capital through a private placement of stock to existing shareholders, new investors and management, at an undisclosed valuation.
Galderma is using the proceeds to strengthen its balance sheet and finance organic growth.
Clearing the way
The private capital raising buys Galderma more time before going public, and dramatically reduces the amount of primary capital that the company will need to raise when it does decide to launch its IPO, making the path to a successful listing less difficult.
“It reduces the pressure on the quantum of primary they need to raise,” said the second source close to the Galderma IPO preparations. “If you need to raise $3bn-$4bn of primary like Galderma in an IPO, it is just too large. This works in a perfectly well functioning IPO market, but it does not work in the kind of market we have seen over the last eighteen months, so Galderma have absolutely done the right thing in terms of doing a private raise.
“EQT has protected the integrity of a future IPO and by participating in the raise alongside management,” added the source. “It means they do not need to come to market anytime soon, and the primary is no longer $3bn, it is now more like $2bn, and it might enable EQT and other shareholders to sell more stock in the IPO.”
In a statement last month, Galderma said that a stockmarket flotation “remains the likely next step in Galderma’s ambition to become the leading dermatology company in the world.”
Galderma has performed well operationally, with Ebitda of $791m in 2022, up 14.5% from the previous financial year. The company expects to deliver 6%-9% net sales growth this year.
“$1bn is a lot [to raise],” said an equity capital markets banker away from the deal. “It is good because it enables them to do more secondary if they wish, although I am sure EQT went and bought more. I do not think they will launch it in the autumn, unless things really improve. I would be shocked if they did.”
Even in a challenging IPO market, there will always be an audience for a strong cash generating business like Galderma, which operates in a resilient sector, but the success of failure of its flotation will come down to valuation expectations of the company and its owner.
“Having done a private round, it helps a lot, although the valuation is not known, so it is hard to say whether it makes it easier or more difficult to decide to move ahead with an IPO next year,” said a second source close to Galderma. “It certainly reduces the quantum of the primary they need to raise which is certainly going to be helpful.”
Galderma did not respond to a request for comment.
Goldman Sachs, Morgan Stanley and Credit Suisse are global coordinators on Galderma’s IPO. Bank of America, BNP Paribas, Citi, Jefferies and UBS are bookrunners.
Credit Suisse’s ongoing role in the IPO is unclear and is reportedly under review following the bank’s forced merger with UBS in March.