BNP Paribas, Lehman Brothers, JP Morgan and Morgan Stanley priced the IPO yesterday (Thursday) on a wave of enthusiasm for a company that is seen as exceptionally well positioned, even if in a pedestrian industry.
Legrand's return to Euronext Paris three years after being taken private by private equity houses Kohlberg Kravis Roberts and Wendel Investissement was expected to be a huge hit.
But the scale of interest in the issue surprised even those working on the deal — it was 35 times oversubscribed.
The startling level of investor interest and lack of price sensitivity allowed the 57.78m new shares, including a 6.6m share increase option and 7.5m share greenshoe, to be priced at the top of the Eu17.00-Eu19.75 range.
One of the reasons for the success of the deal, which valued the company at Eu5.28bn, was the general enthusiasm for equities across European markets. "Secondary market performance cannot be underestimated as a factor in the success of an IPO," said a syndicate banker at one of the bookrunners. "No matter how attractive a company is, it will not fly if the market is against it."
But Legrand enjoyed steady markets and had several features that particularly attracted investors.
Before the IPO was launched, Olivier Bazil, Legrand's deputy vice chairman and chief operating officer, told EuroWeek that the firm was "the only pure play company in the low voltage space", meaning the market for mass market electrical fittings and accessories.
He said Legrand had a history of strong organic growth and the expertise to keep delivering such growth.
The sector in which Legrand operates also appeals to investors because of its recurring cashflow, high barriers to entry and limited cyclicality. "When you combine that with Legrand's good geographical mix of business, you have an interesting proposition," Bazil said.
Another factor critical to the success of the IPO was its pricing. Even at the top of the range, Legrand came at a discount to its main comparables, Swedish-listed Assa Abloy and US-listed Cooper.
The demand for the shares could prompt shareholders such as WestLB, Montagu Private Equity and Goldman Sachs Capital Partners to reduce their stakes after the 180 day lock-up.
KKR and Wendel have agreed to an 18 month lock-up. Each now has a stake of around 30% in Legrand, after being diluted by the issue of new shares.
But while they did not reduce their stakes in the IPO, they will benefit from the repayment of shareholder loans, which will use all but Eu300m of the funds raised.
Credit Suisse, Goldman Sachs, HSBC and Société Générale were co-lead managers.