Latvia’s Citadele Bank pulls IPO

By bne IntelliNews November 11, 2015

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Latvia's Citadele Bank has postponed its initial public offering (IPO), citing “ongoing unfavourable market conditions”, the bank announced on November 11. The postponement comes one week after the bank extended the deadline for subscriptions, suggesting the pricing was overly optimistic.

The pricing range on the IPO was originally set at €1.15-2 per share. At the mid-point, the bank – 75% of which was sold by the state to a group of international investors arranged by Ripplewood Advisors for €74mn in April – would have achieved a valuation of €362mn.

The delay of the offer always suggested investors may have been unconvinced by the pricing on the offer, which – if achieved – would have enabled the new private owners to turn over a huge profit in just a few months. The postponement appears to make that concrete.

Dainis Gaspuitis at SEB in Latvia says the price Ripplewood was seeking "was simply too high". 

"I think the profits Ripplewood was looking to make would have been acceptable if investors had seen a stronger upside potential," adds the Swedish bank's chief strategist Per Hammarlund.

Citadele looked to raise up to €115mn “to help pursue future growth in Latvia and the other Baltics”. Proceeds were also to repay €34.7mn of subordinated debt currently held by the Latvian Privatisation Agency. The bank's CEO Guntis Belavskis now said in a statement the bank will look into "additional potential strategic funding options".

Based on Citadele's current 156.5mn outstanding shares, bne IntelliNews calculates that a stake of around 27% in the expanded company would have been sold. Meanwhile, the EBRD's current 25% stake would have dropped to around 18%, with Ripplewood and the consortium of investors holding the remaining 55% or so.

The offering was set to become the first IPO of a Latvian company since 2004, when communications technology company SAF Tehnika listed. It was hoped that Citadele's listing could have helped spark a revival of Latvia's equity market.

“Companies have not been keen to offer their shares to the public, since for many of them it is easier to receive financing from the banks,” Janis Springis at Swedbank told bne IntelliNews. “[The] offering is an opportunity for investors who want to gain exposure to the Latvian economy."

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