Where next for Senvion after aborted IPO?


March 21, 2016

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And so the speculation about Senvion’s future continues.

The German manufacturer’s owners Centerbridge Partners and Arpwood Capital set out plans this month to list 46% of the firm on the Frankfurt Stock Exchange. The idea was to raise €700m to help Senvion expand in emerging markets, including India.

Just nine days later, on 16 March, Centerbridge and Arpwood cancelled the share sale due to “recent market volatility”. Or, in other words, they did not have enough demand at that price.

But they are now trying again. Today, the firms have announced another IPO of up to 28.75% of Senvion at a reduced price, and are seeking to raise around €320m. They will be desperate not to abort again.

So why couldn’t they get it away at the higher price?

This is partly because investors have been nervous about overpaying at a time of stock market unease, fuelled by the move by the European Central Bank this month to cut interest rates in the eurozone to zero. This has started a fight between the ECB and Germany.

Investors are also reportedly concerned about how Senvion would compete with the likes of Gamesa and Nordex in both established and emerging markets. The company was barred from working in emerging markets by previous owner Suzlon, which sold Senvion for €1bn early last year, and so it has not developed a track record that can convince investors.

And there is the corruption probe by a German public prosecutorinto Senvion chief executive Jurgen Geissinger, appointed in December, and seven of his former colleagues at car parts maker Schaeffler, where he was chief executive until 2013.

The allegations against Schaeffler are of bribery, breach of trust and tax fraud in deals in Turkey from 2004 to 2011. Senvion has said that Geissinger is not the main focus of the probe; Geissinger said he expected the probe to end shortly; and Centerbridge said there is no indication he did anything wrong as chief executive.

None of these is fatal on their own, but they combined to hurt investor sentiment.

Not that Senvion said the aborted listing would do it any harm: “As the offering is secondary in nature, the decision does not affect the growth strategy of Senvion focused on expanding into new markets and the strong momentum that the company is experiencing.”

In other words, Centerbridge and Arpwood think that Senvion will be able to pursue its plan for growth in emerging markets including India, where it set up a subsidiary last month. If it can raise the €320m it wants in the new IPO then it would give vital funds to do so. We will have to wait and see whether its IPO is successful second time around.

Until it happens, this will get people talking about the future of Senvion, as they have been for the last few years under its current and previous owners. Once again, this raises the prospect of a sale of the firm, which Centerbridge was reportedly considering in late 2015 if it could achieve a price around €1.5bn. It was even seeking advice from Deutsche Bank and JP Morgan.

The new twist in the Senvion tale may even open the way for the company to team up with a firm that specialises in new markets.

Fellow German firm Nordex is doing it in its tie-up with Acciona, in a deal that is on the cusp of closing. German giant Siemens has also been looking at a merger with Gamesa, even though those talks have stalled. If Senvion is serious about growing in emerging markets then it could go overseas by getting the knowledge itself, or it could link up with another firm that already knows its stuff.

Senvion’s owners are still focused on the first option but, if it doesn’t work out, that would raise the prospect of the second coming to pass.

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