Sunday 21 October 2018

IPL Plastics flotation under threat as value of peer firms slumps

Price range set to be lower due to rivals' slump if Canadian listing proceeds

IPL chief executive Alan Walsh
IPL chief executive Alan Walsh
Gavin McLoughlin

Gavin McLoughlin

A sharp fall in valuations at peer companies has emerged as the biggest threat to the planned IPL Plastics IPO.

An industry source said the fall has the potential to scupper the flotation altogether. The IPO is still expected to go ahead, but the performance of peer companies RPC and Berry is likely to mean the company brings forward a lower price range to market than would otherwise be the case.

The price range is due to be disclosed on Tuesday as IPL, formerly known as One51, seeks to complete a listing in Canada. The company received shareholder approval for the plan at an extraordinary general meeting on Thursday, but has repeatedly stated that there is no certainty that an IPO will proceed.

IPL chief executive Alan Walsh told reporters last Thursday that in discussions with shareholders, the "overarching feeling" is a strong desire to see the listing go ahead.

Asked about pricing by a shareholder, Walsh said "where the IPO gets priced will be determined by a number of factors, including, in particular, where our peer group is trading at the time the IPO is priced, what the level of demand for the IPO is, etc.

"What we're going to attempt to do in the correspondence next Tuesday is give you a range within which we expect the IPO will be priced, taking into account the advice that we're going to receive from our three underwriting banks.

"Will the current share price be within that range? We certainly hope so."

US-listed Berry has lost around 20pc of its value in the year to date, with more than $1bn wiped off its market capitalisation. The last four weeks have been particularly difficult for the share price.

RPC, listed in London, is down 8pc so far this year.

Cantor Fitzgerald equity analyst William Heffernan told the Sunday Independent that, despite the recent compression in valuations in the sector, Cantor "wouldn't be too worried" because "the earnings growth potential of IPL is still in place".

"It's a bit of a different model [to RPC and Berry] because of its regional revenue and ebitda breakdown."

Heffernan said companies pricing an IPO have to strike a balance between aiming too high, which might not be achievable, or aiming too low, which may depress market confidence.

He added that if management is taking the fall in peer valuations into account for pricing "that's not necessarily a bad thing with regard to being prudent and with regard to the overall success of the IPO".

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