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Thursday, 14 December 2017

CVC cutting Evonik stake follows lull in secondary sales

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Private equity house CVC completed Europe’s first sizeable accelerated secondary selldown in nearly three weeks last night, picking up €519m from the sale of stock in German speciality chemicals group Evonik.

Bookbuilding began just after 5pm in London last night for an offering of 12m Evonik shares held by CVC, representing 2.5% of the share capital. The trade launched with guidance of €34.60 to the market close of €35.455, a 2.4% discount at the wide end.

A covered message followed after half an hour and at 7pm investors were alerted to an upsize to 15m shares and that bookbuilding would wrap up at 7.30pm. Pricing came at the €34.60 level, in part a function of the difficulty in moving investors up the range while also increasing the amount of stock being offered.

The shares have also been on a tear this year, rising more than 36% between mid-January and last Friday’s close, and up nearly 7% during the period of market weakness starting in early June.

Since the start of June, there have been around a dozen secondary overnight sales, a relatively low number for the product. However, some companies have been in ‘blackout’ during that period, the period in the run up to quarterly numbers when insiders are not allowed to sell stock.

CaixaBank was the last €500m-plus secondary sale on June 23. Two weeks before that, the UK government sold a 15% stake in Royal Mail for £750m. During that same period, there have been several primary accelerated trades, a relatively high number.

The Evonik sale represented around 12 days’ trading and 3.2% of share capital. It provided an opportunity for existing investors to top up their holdings. There were also some new names in the multiple times covered transaction, some of whom put in very large orders. The top 10 accounts took more than 50% of the offering, with the top 20 orders accounting for 70% of the deal.

There was no wall-crossing ahead of the deal launch, although the rapid succession of sales by CVC gave bankers good visibility on the depth of demand for the stock and where it could be found. CVC last sold down its stake in May, which followed a sale in March.

Owing to the short period of time between CVC’s sales, the bookrunners on the last deal – Bank of America Merrill Lynch and JP Morgan – were required to waive the lock-up restriction on CVC, allowing last night’s deal to go ahead. Goldman Sachs was the new entrant as a joint bookrunner level with the two returning banks.

Pricing came at the wide end, but at €34.60 it maintains the gradual progression from €31.85 in May and €29.15 in March.

CVC retains a holding of around 6% in Evonik, putting a likely exit on the cards this year either through two trades or one clean-up sale.

Evonik shares opened today at €34.70, swiftly pushed above €35 but then came off in the late morning before dipping below pricing after midday. A slight rally in the afternoon allowed the shares to trade just below pricing.

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