IPO setback for EQT

Swedish refrigeration business Dometic has shelved plans for what would have been Sweden’s first IPO for eighteen months because of weaker-than-expected demand for the offering.

Swedish private equity house EQT Partners has abandoned plans for an IPO of portfolio company Dometic, citing insufficient investor appetite for the offering.

The issue was priced in the SKr190 to SKr240 price range, giving the business a valuation of up to SKr7.4bn (E820m). According to the Financial Times, there were orders for 19.5m shares, against 18m shares being offered, including an over-allotment option.


In a statement this morning, EQT said that although the shares on offer were fully covered by investor demand within the price range, ‘demand from IPO investors was not found to be sufficient to ensure a successful post-IPO market for the shares.’ EQT went on to say that the business ‘continues to perform well with excellent prospects and EQT Northern Europe is committed to participate in the future development of Dometic as principal shareholder.’


Dometic, which makes fridges and air conditioning units for boats and caravans posted sales of SKr6.4bn (E711m) last year and an EBITDA margin of 15 per cent. It has benefited from a decline in holidays involving flights following September 11 2001, and an increase in the use of caravans and other recreational vehicles. The company, which has 4,000 employees, is also profiting from an ageing population, as older people are more likely to buy recreational vehicles.


The listing of Dometic, and in particular the growth projections for the business, had been the subject of negative publicity in the Swedish press, although Hakan Johansson, a partner at EQT, refuted the reports. “It was suggested in the local media that our growth target of ten per cent was unrealistic. However, if you look at the data, the business has achieved an average of eleven per cent growth since 1992, and 13 per cent in the past five years. We also believe the margins for the business are very sustainable.”


“In a[n IPO] market like this, there needs to be extra strong demand or the company could suffer,” added Johansson. “As a sponsor, we might also have suffered. The price range was reasonable, and allowed for a substantial discount to the company’s peers in the Nordic engineering market.”


Johansson declined to comment on EQT’s timetable for Dometic, although he added that the company was performing well. “We are in no hurry to sell Dometic. The company has performed very well and was identified as an IPO candidate very early on.”


The Stockholm Stock Exchange was in the doldrums for three years, but in 2003 it has risen more than 25 per cent. Despite this, confidence remains fragile and private equity firms will be more cautious with their IPO strategies.


Industri Kapital is reported to be considering listings for Oriflame, the cosmetics group, and VSM, a manufacturer of sewing machines. According to Johansson, “if there is not sufficient appetite for a business like Dometic, the market is not ready.”