Puig will go public this Friday valued at 14,000 million euros after choosing to place the IPO price at 24.5 euros per share. It is the highest of the indicative range contemplated in the IPO prospectus, and which ranged from 22 to 24.5 euros, a reflection of the success of the largest operation in Europe so far this year. The strong demand from institutional investors (the operation does not have a retail section) has allowed the Catalan luxury cosmetics and perfumery group to maximize both the money that current shareholders will receive from the sale of securities and the raising of funds. The company will go on the market as a clear candidate for the Ibex 35 (at 24.5 euros it will be the fifteenth company by capitalization) and the third most valuable family company on the Spanish stock market.
The company, in fact, only took a few minutes, once the order book was opened, to cover the entire placement last week. A good reception that did not lose momentum as the days went by, and in fact last week the placement banks suggested to the company the possibility of raising the price of the offer, once the IPO was already covered at 24.5 euros . Puig, finally, has stuck to the planned range, but has pushed it as much as possible. He will have to wait, however, for the closing of the books, scheduled for this Tuesday according to its IPO brochure. Goldman Sachs, JP Morgan are the coordinators of the operation, in which Bank of America, BNP Paribas, CaixaBank and Banco Santander also participate.
This strong demand, in any case, gives the company a cushion to, barring surprises, close the premiere with increases. Market sources consider that the company has preferentially placed the portfolios of large funds, given that it operates in a sector, that of luxury, where investor interest has grown this year. They also indicate that the demand already collected corresponds to high-quality funds and investors, who have submitted relevant positions. One of them is Criteria, which will enter as a shareholder in the premiere.
Lola Jaquotot, equity manager at Finaccess Value, recalls that “cosmetics companies have had a few years of great growth and very good results, which makes it the best time to guarantee going public.” Now, she estimates that “it is a little more expensive than we would have liked,” an opinion that is shared by other managers. Thus, it estimates a PER of 25 times, based on the valuation of 14,000 million and an expectation of annual growth of between 15% and 20%, which places the company “in line with comparables such as Coty (PER 25 times), L’Oreal (PER 33 times) or InterParfums (PER 22.8 times)”. A situation that, in her opinion, leaves them “little margin of safety.”
Another issue that the managers focus on is the traditional discount that is required from companies that have two types of shares, as Puig will do. A discount, which is traditionally around 20%, as it is understood that B titles have fewer political rights than A titles – one versus five in the case of the cosmetics firm. “When a company is listed with A and B shares, the securities without political rights are listed at a discount because, although in reality it is the same company, with the same results and profits, the investor has fewer voting rights, that is, less power to influence it. In this case, that discount does not exist,” says Jaquotot.
Along the same lines, another fund manager believes that it would have been convenient for Puig to choose to quote at a discount since he did not have track record and have debt.
Puig’s IPO operation will be structured as a combination of a capital increase and a direct sale of shares. In the first tranche of the transaction, known in the market as an OPS (public offering of shares), the company hopes to raise 1,250 million with the issuance of between 51.02 and 56.81 million new shares. The second tranche will be a sale of shares, an IPO (public offering), in which the family will dispose of between 55.51 and 61.81 million shares, for which it will pocket around 1,360 million. The capital increase as a way to buy back the minority stakes that it does not control in its latest acquisitions, Charlotte Tilbury and Byredo, as well as repay part of the company’s debt and finance future growth. Placing shares will allow the family to make cash and facilitate the family transition. Furthermore, the operation contemplates a voluntary expansion (the so-called green shoe) of 15%, which would mean raising an additional 390 million euros.
Puig puts 32% of the company’s capital on the market; 3 billion on a post-IPO valuation of 14,000. In any case, the family character of the company is protected. The shares that are put up for sale are all class B, with fewer political rights than class A shares. These will remain in the hands of the Puig family and each have five voting rights (for one of class B shares). Thus, the class A shares, in the hands of the family, will have 91% of the voting rights at the shareholders’ meeting. The company has also taken measures to prevent the sale of class A shares to third parties.