US travel firm Travelport has called off its £1.2bn ($1.9bn) London stock market listing due to weak investor demand. The failure to save the listing is a blow to majority-owner, Blackstone, the private equity group which had hoped the listing would lay the groundwork for a series of IPOs it had planned for this year. It is also bad news for other private equity firms planning to exit portfolio investments this year.
Travelport had hoped to price its deal in a 210p to 290p range, valuing the company at £2.16bn. However, sources close to the deal reported that the price had fallen to as low as 180p by 10 February, prompting the decision to postpone what would have been the biggest initial public offering (IPO) in London in two years.
Travelport’s chief executive, Jeff Clarke, blamed market volatility for the decision to postpone. “Since we announced our intention to float, there has been significantly increased volatility and uncertainty in global equity markets, as a result of macro circumstances unrelated to our business,” he said in a statement on 11 February. “We will consider bringing it back to the market at a future date, when equity market conditions are more favourable.”
Another Blackstone company, Merlin Entertainment, owner of Legoland and London Eye, also announced on 11 February that it was putting on hold its planned £2bn IPO because of market volatility.
Despite initial optimism of a resurgence in financial sponsor backed IPOs in 2010, weak investor demand has led to many being shelved for the time being. Many investors are sceptical of the high level of debt that private equity backed companies took on board when they were originally bought-out. The rush for financial sponsors to exit from their investments has only increased this scepticism.
Graham Packaging, the Blackstone-owned US plastic container maker on Wednesday lowered the price for its IPO for the second time in the face of faint investor appetite.
Similarly, Asset manager Gartmore, which chose the IPO route in December last year, was forced to scale back its issue and cut the price by almost 16% from the mid-point of its target range.
See IPOs: Too soon for some, in The Banker's Equity Capital Markets report
