Eutelsat cancels initial public offering

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Eutelsat, the world’s third largest satellite operator, on Thursday night abandoned its planned initial public offering on Euronext Paris, citing volatility in European equity markets.

The news could have a chilling effect on other IPOs in the pipeline, one person close to the process said on Thursday. “We are not at the stage where we can say the IPO market is closing down,” he said, “but I think there are going to be serious questions over all forthcoming IPOs.”

The private equity-owned group, which had hoped to attract a valuation of up to €3bn, had already been forced to cut the price of the offering this week by more than 20 per cent.

On Thursday night, it said it had been particularly concerned “that the after-market performance would not, in light of the volatile market environment, reflect the fundamental value of the company.”

People close to the company said the markets had begun to turn sour in the last two weeks, and cited the poor after-market response to the IPO of Telenet, a Belgian cable company, as its reason for cutting the mid-point of its price range by 22 per cent on Tuesday, from €15.25-€17.75 to €12-€13.80.

After a positive day of book-building on Wednesday, the main French and German stock market indices fell by almost 2 per cent yesterday, and France Telecom and Alcatel shares saw steeper falls following disappointing earnings forecasts. US investors had become as cautious as European shareholders, one person close to the IPO process said.

Eutelsat’s private equity owners - Eurazeo, Spectrum Equity Investors, Texas Pacific Group, Cinven and Goldman Sachs Capital Partners - had decided this week not to sell any of their stakes for at least six months.

A spokesman would not say last night when Eutelsat might try to revive its IPO plan. The company said that it had received support from “a substantial number of institutional investors,” and the order book was over-subscribed by an undisclosed amount, but the market volatility deterred the company’s owners from proceeding. “

“It was not a question of price,” one person close to the company said. “Investors just don’t want to increase their exposure to the equity market.”

Some analysts had challenged the initial valuation put on the company, however, questioning whether it deserved a premium to SES Global, its closest rival in Europe. SES shares fell 2 per cent yesterday on Euronext and are down more than 10 per cent since September.

The IPO was led jointly by Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley. The company has said it expected to spend €36m on fees and expenses associated with the IPO.

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