Saint-Gobain launches IPO of Verallia arm

Saint-Gobain is hoping to raise up to €1.1bn ($1.6bn) from the initial public offering of its glass packaging business, bringing an end to a four-year struggle to sell the maker of Dom Pérignon bottles and Nutella jars.

The sale of at least 40 per cent of Verallia, the world’s leading wine bottle manufacturer, will be the first significant float in France this year and will test the appetite of investors for new shares after a difficult period in western Europe’s IPO market.

Analysts said that the offering was priced competitively while Jerome Fessard, Verallia’s chief executive, said he was “determined to complete the process”. He added: “We are confident in the quality of the asset.”

The offering is being led by Bank of America Merrill Lynch, BNP Paribas and JPMorgan, with nine other banks involved as co-bookrunners and co-managers.

The spin-off will bring an end to a 100-year involvement in bottle making for the French building materials group.

Pierre-André de Chalendar, chief executive of Saint-Gobain, Europe’s biggest supplier of building materials, said the sale was “the final step in our strategic decision to refocus on the habitat [residential] and construction markets”.

Mr de Chalendar first promised to sell the glass packaging business in 2007, when he took the top job, but he had to abandon the plans in 2008 because of the global financial crisis.

He wants the cash for small and medium-sized acquisitions of businesses in emerging countries and to invest in its construction products and building material distribution units. He could also return cash to shareholders.

“If money was returned to shareholders this would be very positive for the share price as it would show the management is prepared to be very disciplined,” one analyst said.

Several private equity investors showed interest in buying Verallia earlier this year, but company sources said no concrete offers were made.

The IPO will value Verallia at between €1.96bn and €2.4bn, according to an indicative price range of €29.50 to €36. Saint-Gobain has an option to sell another 6 per cent stake if it is over-subscribed.

Sven Edelfelt, analyst with Aurel, a Paris-based broker, said the price was attractive because it was set low compared with the $5bn market value of US-based Owens-Illinois, Verallia’s rival. Owens-Illinois had sales of €5bn last year, compared with Verallia’s €3.6bn.

Saint-Gobain will be restricted from selling its remaining shares in Verallia for a year. Mr Fessard said the new company would pay out 40 per cent of net profits in dividends to shareholders from next year.

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