WE Soda has abandoned plans for a $7.5 billion IPO in London in another blow to UK equity capital markets that have struggled to attract large listings in recent years.
The UK-based group, the world’s largest producer of natural soda ash, blames the decision on “extreme investor caution in London”, which has prevented it from getting the valuation it was aiming for.
In a statement on Wednesday, WE Soda chief executive Alasdair Warren said “investors, particularly in the UK, remain extremely cautious regarding the IPO market.”
WE Soda, which has two production sites in Turkey and planned to become a “big fish” in London’s relatively smaller capital market, canceled its planned float after discovering the market was willing to pay about 30 percent less than it had hoped. said three people familiar with the case.
Sodium carbonate is used in industrial processes such as glass production, and is a component in products ranging from batteries to detergents.
The listing of the company, which is controlled by Turkish media and industrial mogul Turgay Ciner, would become the UK’s largest IPO in 2023, with the group expected to join the FTSE 100.
However, a person familiar with the matter said senior executives at the company mishandled investor conversations, adding to concerns about management holding zero shares in the group. Prior to joining WE Soda, Warren worked as a senior capital markets banker at Goldman Sachs and Deutsche Bank in London.
WE Soda’s decision to withdraw from the UK IPO is the latest setback for the London stock market, which has struggled in recent years as major companies have opted to list on major venues such as Wall Street. There were just four listings in London in the first quarter, raising just £81m, the sixth worst quarter for IPOs in the British capital since 1995.
London has suffered in recent years as other major industrial companies have withdrawn their listings due to turbulent market conditions. In 2021, private equity group Advent explored going public with factory parts supplier Rubix in London, aiming to raise €850 million before scrapping plans.
Meanwhile, Arm, the chip designer, rejected a government call to list in the UK and CRH, the world’s largest building materials group, plans to move its listing to Wall Street.
The collapse of the WE Soda listing is a setback to Rishi Sunak’s ambitions to improve London’s reputation as a destination for large IPOs.
But government officials insisted the decision was not a blow to the city’s reputation, noting that there had been a period of low issuance in most major markets in recent months.
A banker familiar with the WE Soda lawsuit said investors were unwilling to buy at the price the company sought, despite the generous offer to pay more than $500 million in dividends.
“The transaction was possible, but at a price point where the owner wouldn’t do it,” the person said. “We shouldn’t write off the entire IPO market, but it’s quite tricky.”
Warren told the Financial Times on Tuesday that the company had received “massive” interest and was holding about 300 investor meetings.
He said WE Soda had three challenges with investors: poor IPO market conditions, little understanding of the soda ash industry and convincing them of the sustainability of margins for years to come.
“This question is this issue of caution in terms of the IPO market and ‘what discount’ they are asking for that caution,” he said.
Commenting on the news, City Secretary Andrew Griffith said: “We continue to attract some of the most innovative and largest companies in the world and companies will have unique characteristics and competitive reasons to list in capital markets around the world.
“The UK is undertaking ambitious reforms to the rules governing its capital markets, including through the Edinburgh reforms, to build on our continued success as Europe’s leading investment hub, and the second largest globally.”
Additional reporting by Jim Pickard