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Saturday, 18 November 2017

EMEA Equity House: JP Morgan

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  • Streets ahead

IPOs dominated the landscape in 2014 and one bank led from the front, regularly printing several deals in a week, while simultaneously making the UK its home. JP Morgan is IFR’s EMEA Equity House of the Year.

In a year when the IPO market surged to levels last seen in 2007, JP Morgan was king. The US bank left rivals in its wake, launching 38 IPOs in EMEA during the IFR Awards period versus the nearest tally of 27 listings by Deutsche Bank. They were not punts either, as JP Morgan priced 34 transactions.

More significantly, JP Morgan was in the driving seat. The global co-ordinator role grew in importance in 2014 as issuers acknowledged that syndicates swollen with multiple bookrunners were unwieldy and hindered success, but declined to demote their lenders.

The subjugation of bookrunners took some senior bankers by surprise, but not the top US banks familiar with a similar development in their home market.

JP Morgan was a global co-ordinator on 29 of its successful IPOs. Goldman Sachs was the only other bank to execute 85% of its IPOs with a top line role, but could not compete on volume with 17 GC deals, still the second highest in the region.

Well anchored

Sizeable and complex, listing stock exchange group Euronext involved floating an entity that did not previously exist and required co-operation with regulators in several countries and multiple ministries of finance. Getting a large group of European financial institutions to commit to buy a third of the company for nearly €450m with a three-year lock-up as cornerstone investors was not only impressive but also set the tone.

Cornerstone and anchor investments were increasingly important for generating momentum on IPOs, and in the second half were often critical for success. The latter was especially true for German property company TLG Immobilien’s €375m IPO and the revival of Swiss biopharma Molecular Partners’ briefly cancelled deal, where JP Morgan was sole global co-ordinator. Both deals came in the exceptionally challenging period in late October/early November when markets and confidence had been decimated.

Just a few weeks earlier, a handful of cornerstones bought more than 40% of internet incubator Rocket Internet’s €1.4bn Frankfurt entry standard listing. Getting committed backers for a high-growth/high-risk proposition – especially an incubator that is so difficult to value – was necessary to draw the backing of generalist investors needed for a float of that size.

The bank’s IPO roster was not just longer than everyone else’s, it was on the top line for the largest corporate IPO of €1.77bn when ING listed insurer NN Group, and for the Dh5.8bn (US$1.58bn) float of Emaar Malls Group. By pricing EMG at the top of the range and drawing demand of more than US$40bn, this single deal has reignited the Gulf region with a pipeline rapidly building for 2015 and beyond.

Anglophile

It is hard to ignore the bank’s market share in the UK, with the wisdom of the Cazenove acquisition growing clearer each year.

The bank was again chosen by the UK government to lead a sale of Lloyds Banking Group, which at £4.2bn is the largest-ever accelerated bookbuild in Europe, and was then hired by Lloyds to lead the £500m IPO of TSB.

In the IFR Awards period the bank clocked up 47 trades across all products, claiming a 15.2% market share in the UK.

Just Eat’s £360.1m IPO in April was one example that was heavily oversubscribed and upsized, only for the restaurant aggregator to fall in the aftermarket and be tarred a failure. Yet by the end of the IFR Award year its shares were up 21%. Spire Healthcare was up a stunning 52%.

There were some failures too, with four deals cancelled after beginning bookbuilding and eDreams Odigeo falling 85% from its IPO price after disappointing with its first set of numbers after floating and then falling out with British Airways and Iberia. Considering the depth of JP Morgan’s pipeline, however, missteps were inevitable but kept to a minimum.

JP Morgan, led by Klaus Hessberger and Achintya Mangla, has also made great strides in equity-linked, ranking third during the period and completing 16 deals. These included US$1bn of paper for DP World, innovation on Telefonica’s exchangeable into Telecom Italia, a dual tranche for Qiagen alongside a call-spread and tender, zero-coupon pricings for Unibail-Rodamco and STMicroelectronics, and a tap for Grand City Properties.

Being so busy, there were some weeks where JP Morgan wasn’t just in the flow, it was the flow. In one week it priced four IPOs, three rights issues, one dual tranche CB and an ABB. The syndicate desk deserves its own award.

To see the digital version of the IFR Review of the Year, please click here .

To purchase printed copies or a PDF of this report, please email gloria.balbastro@thomsonreuters.com .

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