German automotive parts maker Schaeffler sharply reduced the size of its planned initial public offering (IPO) on Monday, after delaying it last week in the wake of the Volkswagen emissions scandal and volatile markets. VW accounts for more than 10 percent of sales at Schaeffler, which makes ball bearings for products ranging from tools to airplanes.
Schaeffler announced a price range for the offer of between 12 and 14 euros ($13.48-$15.72), to raise around 975 million euros. Sources familiar with the matter had said the company's initial plan was to raise roughly 2.5 billion euros, indicating an IPO price of more than 15 euros a share. The company said the issue would now go ahead on Friday. Schaeffler, which is saddled with 10 billion euros in debt, generates three quarters of its group revenue from the automotive business and had to trim its IPO ambitions after the Volkswagen scandal rocked auto shares and markets remained volatile on fears of a China slowdown.
The German stock market's volatility index hovered around 30 on Monday, while bankers usually say readings above 20 make IPOs difficult. Sources told Reuters last week that Schaeffler would push back its flotation and scale down the IPO. The company, which has been family controlled, is placing 75 million non-voting shares, of which 66 million are new shares issued by its operating business Schaeffler AG, and 9 million existing stock owned by Schaeffler Verwaltungs GmbH, a holding company of the Schaeffler family.
That compares with the group's original plan to place 166 million shares, including 100 million from the family holding. After the flotation, only 11 percent of the company will be widely held, but the family owners are planning to place additional shares after a six-month lock-up period and thereby achieve the free float goal of 25 percent, the company said.