Rottapharm Madaus Scraps IPO After Investor Appetite Dwindles

Jul 10, 2014 12:15 pm ET

July 10 (Bloomberg) -- Rottapharm Madaus, a family owned Italian drugmaker, pulled a plan to sell shares to the public, its second failed attempt at getting funds in two years.

The Rovati family, which controls 100 percent of the drugmaker through the holding company Fidim Srl, decided not to proceed with the IPO after the process didn’t lead to the anticipated valuation, Rottapharm said in a statement today. The family was aiming to raise as much as 540 million euros ($735 million) through the sale, which would have been the biggest health-care IPO in Europe this year.

“The conditions have not been met for the execution of a transaction that reflects the current intrinsic value of the company, also in light of the unfavorable Italian and international market conditions,” the Monza, Italy-based company said. Rottapharm “will continue its path of growth, innovation and creation of value, on the basis of a clear and defined strategy.”

Investor appetite for Italian companies has been dwindling. Shipbuilder Fincantieri SpA’s IPO hit a snag last month when the company had to cut the offer size due to lower-than-expected demand for its stock. The shares have since been trading below their IPO price.

An earlier plan by the Rovati family stumbled two years ago when talks about a potential partnership with Clessidra Capital Partners and Avista Capital Partners collapsed.

Complicated Negotiations

Rottapharm shares were planned to be sold through today, as the Rovati family sought funds to pay down debt and make acquisitions. The offer was comprised of 50 million shares owned by Fidim, or 25 percent of capital, priced at a range of 7.25 euros to 9 euros a share. The offer also included an additional 10 million shares to be sold by Fidim in case of higher-than- expected demand for the stock. The IPO price range valued Rottapharm at 1.45 billion euros to 1.8 billion euros.

Negotiations for the IPO price range were complicated as the Rovati family was targeting a valuation of about 2 billion euros, two people familiar with the talks said. Once the process started, demand for Rottapharm shares was weak even at the lower end of the range, people familiar with the sale said.

Sabrina Ragone, an outside spokeswoman for Rottapharm with Barabino & Partners in Milan, said she had no additional comment beyond the statement published earlier today.

The Rovati family has been seeking investors in Rottapharm for some time. The company entered discussions in 2012 to sell a 50 percent stake to Clessidra and Avista in a transaction that would have valued the company at about 1.7 billion euros, people with knowledge of the plan said at the time. The talks faltered over disagreement on issues such as shared governance, Rottapharm said after the deal collapsed.

Expanded Abroad

Rottapharm, which was founded in 1961, had sales of 536 million euros in 2013, according to documents provided by the drugmaker. The company has 1,807 employees and 5 production sites in Europe and India. It expanded abroad through deals including the purchase of Germany’s Madaus Pharma in 2007 and now operates in 90 countries.

The drugmaker sells products including Dona, a glucosamine product used to promote healthy joints, Agiolax for constipation and Saugella for intimate hygiene.

Deutsche Bank AG, JPMorgan Chase & Co. and Goldman Sachs Group Inc. were the managers of the stock sale. Banca IMI SpA, Jefferies Group LLC and Morgan Stanley were joint bookrunners.

--With assistance from Ruth David in London.