Volatile markets reject IPOs for Merlin and Travelport

Buyout group Blackstone delays flotations worth as much as £3.2bn
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The Independent Online

Blackstone withdrew a second IPO in 24 hours yesterday when plans to float the London Eye operator, Merlin Entertainment, were halted. The move came after the private equity group pulled a deal for its airline ticketing business, Travelport, blaming volatile market conditions.

Investors had been expecting a deal for Merlin, worth up to £2bn, as early as next week, but its chairman, Sir John Sunderland, said yesterday that an initial public offering "remains under consideration, but we do not expect to reach any conclusion in the near future".

Uncertain markets were blamed for the decision, taken on Wednesday night, to cancel the IPO for Travelport. Blackstone had hoped to raise as much as £1.2bn from the group's sale, which would have registered as London's biggest IPO for more than two years.

Pricing on the deal, which was arranged by investment banks Barclays Capital, Credit Suisse, Citigroup, Deutsche Bank and UBS, was thought to have dropped late on Wednesday as investors told the banks that the original 210p to 290p-a-share range would not be met. Reports suggested said that the price had fallen to as low as 180p, but even the discount was not enough to persuade investors of the deal's value. The company denied it had agreed to any price lower than initial guidance.

Travelport's chief executive, Jeff Clarke, blamed increasingly unstable market conditions for the decision to cancel the sale. "Since we announced our intention to float, there has been significantly increased volatility and uncertainty in the global equity markets, as a result of macro circumstances unrelated to our business," he said.

The collapse of the deals is a blow to the market's capacity to absorb equity transactions, and blunts arguments that investors' appetite for more risk was increasing.

The aborted IPOs are also the latest in a string of problems for recent deals. Shares in the asset management firm Gartmore have lost 16 per cent since the group listing in December, while the value of Rusal – the Russian aluminium group – has fallen by almost 20 per cent since its IPO on the Hong Kong and Paris stock exchanges last month.

Other heavily trailed deals, such as those for Belgian chemical company Taminco and Hochtief Concessions, the German infrastructure outfit, have also failed to impress investors.

"Fundamentally, there is little demand for new deals," said one equity strategist. "The market has absorbed a huge amount in rights issues in the last 12 months, often from groups that are relatively healthy. The problem for private equity exits is often these companies have lots of debt and this is not attractive, especially to investors that have little money to put to work."

A number of London IPOs are thought to be imminent. The fashion retailer New Look is set to raise up to £1.8bn as early as next month, while the Spanish banking group Santander may test the market's nerve with sales worth £15bn for its UK assets, including Abbey and Alliance & Leicester.

Others argued that any IPO needed a compelling case before investors would back a deal. "The problem for companies coming to the market at the moment is that getting a float away has nothing to do with valuation. It is all about sentiment. Markets are still nervous and unwilling to invest in regurgitated material unless you offer a guaranteed profit," David Buik, of BGC Partners, said. "In the current climate, the only one I can see getting away easily is Betfair where lots of people have heard of it and there will probably be strong interest from retail investors."

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