The first Italian initial public offering of 2014 cemented confidence in UniCredit's unusual partnership model with Kepler Cheuvreux in equity capital markets.

As life has returned to the Italian equity market, so too has the initial public offering (IPO). The first company to list in Milan this year was Anima Holding, Italy’s largest independent asset manager, in a deal which allowed UniCredit to parade the strengths of its unusual distribution model.

UniCredit has outsourced its cash equity sales, distribution and research since it formed a strategic alliance with broker Kepler Capital Markets at the end of 2011. Last year Kepler acquired Cheuvreux from Crédit Agricole to create Kepler Cheuvreux. The brokerage works exclusively for UniCredit, which retains a 5% stake, in Italy, Germany, Austria and central and eastern Europe. Crédit Agricole, which retains 15% of the enlarged business, has a similar arrangement covering France and Spain.

Europe covered

With more than 100 salespeople, Kepler Cheuvreux gives UniCredit broader European equity coverage than any other European bank, according to Claudio Villa, UniCredit’s deputy head of global equity capital markets. “On the research side, its local analysts give us local input from a country point of view,” adds Mr Villa. “That complements our own multi-local approach.”

It also complements the reach of the bulge bracket firms. They tend to target the top 100 to 150 investing accounts, which are vital if equity deals are to get done. Through Kepler Cheuvreux, UniCredit targets the top 1200, including the lower tier accounts not covered by the big players, bringing in incremental demand that can be very important when a deal is hard to pull off.

The arrangement attracted some negative comments when it was first announced but, clearly, it works, since UniCredit ranked number one in Italian ECM bookrunning last year. It was joint global coordinator on the first Italian IPO of this year, is playing a senior role in the next four coming to market in the first half, and has further mandates for the second half, according to Mr Villa. “This is a testament that the alliance is working very well,” he says.

Improving sentiment

Like other markets in Europe, and particularly the peripherals, Italian equities are benefiting from the perception that the eurozone crisis is over. Concerns about big Italian banks, such as UniCredit, have subsided and the outlook for the economy is more positive than for some time. Government is always a risk in Italy, but the new one, under prime minister Matteo Renzi, seems to have got off to a good start. The FTSE MIB, the benchmark stock market index for the Borsa Italiana, has risen more than 40% since June last year, and Italy’s investment bankers and capital market lawyers are now all frantically busy working on IPOs. 

Anima came to market on the back of this new surge, as shareholders seized the opportunity to monetise some of their holdings. The company is the result of various mergers between asset management companies owned by Italian banks, who then kept stakes in the business. Before the flotation, its largest shareholders were Italian private equity house Clessidra, Banco Popolare di Milano and Monte dei Paschi di Siena. It was these three, in one form or another, who sold some of their shares into the IPO and received all the proceeds. The fact that the banks will retain an interest (with a three-year lock-up) is important to Anima’s future, since they distribute a large proportion of its retail products.

The decision to float was taken last year, with the express intention of being the first IPO of 2014 on the Milan exchange. UniCredit was mandated as joint global coordinator and joint bookrunner, alongside Goldman Sachs and Banca IMI, the investment banking arm of Intesa Sanpaolo. UBS was a joint bookrunner.

“They wanted to be first in the market, to capture all the momentum,” says Paolo Garzarelli, a UniCredit director who was deal captain on the Anima transaction. “That meant trying to price the deal ahead of the Easter break.”

Race against time

Like others in the race, Anima had to get its full-year 2013 financial results out before the sale process could formally begin. As an asset manager, it had the advantage of having financials that were relatively easy to prepare. “Anima had its full-year results audited by the beginning of March,” Mr Garzarelli notes. “For other companies in Italy, it is normally not before the end of March.”

Nonetheless, every day counted. Early meetings for long-only accounts and hedge funds in Italy and the UK during February gave confidence that the deal was likely to fly. But they also uncovered the counter-intuitive fact that the Italian institutional market was not going to provide massive support for the offering. As competitors, they were more sceptical of the company.

UK investors, however, and UK-based US investors were more enthusiastic. They understood the industry – obviously enough, being in it themselves. They liked the decent margins from Anima’s wholly retail business. They liked the fact that Italy is a very rich country with high household wealth. And they liked the under-penetration of Italy’s asset management market compared with other major European countries. Asset management products owned by Italian families make up 26% of their financial assets, compared with an average of 40% across France, Germany, Spain and the UK, according to the Anima prospectus.

“We managed to keep the timeline very strict,” says Mr Garzarelli. “The banks had to stick to the timetable, with not one day of slack. With Easter on April 20, we roadshowed the company up to April 10, with the first day of trading on April 16."

Meeting market preferences

Because the market prefers it, the sellers opted for a large free float – 55% before exercising the greenshoe and 63% afterwards. Market likes and dislikes also dictated only a small retail allocation. Institutional investors see these holdings as more volatile and less liquid than their own, so the retail tranche was limited to 10% of the offering.

There were nine days of roadshow in all, taking in London, New York, Boston, Paris, Frankfurt and Milan. “The management team performed very well, and there was an 85% conversion rate from the one-to-one meetings,” says Mr Garzarelli.

The pricing took into account prevailing valuations for Italian asset gatherers – a different animal, targeting high-net-worth individuals, unlike Anima’s broad-based retail market, but useful for setting the upper parameters. Another reference point was price/earnings multiples of European asset managers similar to Anima, to provide a solid base. That suggested a range of €3.50 to €4.50 per share, valuing the company at between €1.05bn and €1.35bn.

The book was covered at the bottom of the price range on the first day of bookbuilding, and covered across the full range by day four. There was some Italian market volatility towards the closing stages of the bookbuilding process, but the shares were finally priced towards the top of the range at €4.20.

The book was five times covered at the issue price. This was the largest IPO of an asset management company in continental Europe for the past 10 years and, by being the first of the season, it was able to take advantage of strong liquidity, including sizable interest from the US. As feared, the IPO was largely shunned by Italian institutions, who accounted for a mere 3% of the institutional allocation.

UK investors, on the other hand, took 45% of the institutional tranche, while the US accounted for nearly 30% and Germany took 7%. Italian retail investors were altogether more keen, and took virtually all of the retail allocation. This was kept at 10% of the whole, in spite of the fact that it too was more than five times oversubscribed. The shares hit a post-IPO high of €4.44 but have subsequently been hovering closer to the issue price.

UniCredit points to the fact that, via Kepler Cheuvreux, it generated more than 27% of the overall institutional demand at IPO price, in line with Goldman Sachs and UBS, and ahead of the other Italian bank, Banca IMI. And it is looking forward to the rest of the year.

“There is a tremendous pipeline, unprecedented for years in the Italian market,” says Mr Villa. “This is clearly a market that is gathering pace, and we are confident it will remain that way to the end of the year.”


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