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Away we go: Galderma to follow Douglas off IPO start line in packed calendar until summer

Saturday saw the start of the global Formula 1 season, and, in the same spirit, European companies are now prepping to race to public markets with a packed IPO line-up led by some huge names.

Last week, this column ran the rule over German beauty retailer Douglas, the first big name off the starting line, which launched its IPO today. It is expected to be joined by another heavy hitter, Swiss-skincare conglomerate Galderma owned by Swedish sponsor EQT AB [STO:EQT].

Three sources close to the Galderma IPO confirmed to ECM Pulse that a listing announcement is imminent.

“The plan is definitely to price before Easter,” said one of the sources. “There is lots of flexibility on the timings and this can definitely be done in less than four weeks,” he added, noting there is already growing interest from investors in anchoring the IPO.

Galderma’s listing, a deal that has been on the cards since 2022, is expected to be another multi-billion USD IPO.

The Galderma and Douglas IPOs are set to be a seminal moment for European ECM, given their likely sizes, and will set the tone for an incredibly busy IPO window from Easter until the summer break.  Douglas plans to raise around EUR 1.1bn at IPO, consisting of IPO primary proceeds and an additional equity injection of around EUR 300m from shareholders.

“Douglas is very levered so will have to come at a discount,” said an ECM investor. “Galderma feels in better shape after its private round last year and EQT has a good reputation of being a sensible seller,” he added.

Europe’s IPO market is off to a good start. An improvement in performance from the deals priced in 2023, many now trading well above offer, has boosted European IPO moods overall.

Large deals priced since the start of 2022 have now generated more alpha for investors than both the Stoxx 600 and S&P 500 over the same period, flipping the narrative of IPOs as an underperforming asset class.

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Chart note: European IPOs over USD 200m, excluding Turkey

Although the sentiment towards IPOs in Europe is improving, that doesn’t change the stakes for the Douglas and Galderma IPOs.

ECM investors have long memories and remember poorly performing deals of the past years, particularly the class of 2021, many of which remain well below the IPO prices. Long-onlies are still sitting on large losses and struggling to exit underwater stocks because of poor liquidity.

“People need to remember there is a lot of scar tissue on the buyside from the last three years. A couple of good ones recently is helpful but they are idiosyncratic, so Galderma at least has to trade well and have decent liquidity,” said the investor.

Valuation flexibility

This column last week reported that investors want to see a meaningful IPO discount on Douglas and the same goes for Galderma.

EQT reportedly wants to see Galderma valued at around USD 20bn, an achievable target when looking at its listed peers.

On 29 February, the company reported its FY23 results, where it achieved over USD 4bn in revenue for the first time and core EBITDA of USD 942m.

This news service has identified Swiss-American pharmaceutical and medical device company Alcon [SWX/NYSE:ALC] and French personal care company L’Oréal [EPR:OR] as Galderma’s best possible peers.

Alcon had FY23 sales of USD 9.37bn with EBITDA of USD 2.26bn, giving it a 2023 EV/EBITDA multiple of 20.3x. L’Oréal has FY23 sales of EUR 41.1bn with EBITDA of EUR 4.4bn, giving it a 2023 EV/EBITDA multiple of 24.6x. The average multiple of both is around 22.5x 2023 EV/EBITDA.

Galderma, therefore, could have a pre-money enterprise value of USD 21.1bn based on the average of the peers. When compared to the two peers individually, it could have an EV of USD 23.1bn, when compared to L’Oréal and USD 19.1bn when compared to Alcon.

However, EQT is willing to be flexible on valuation to make sure the stock trades well,  said a source close to the Galderma IPO.

“The dynamic of the next wave of European IPOs will be very realistic on valuations on the table and sellers can come back again should they wish to for secondaries,” the source added. “It is a tried and tested strategy; you sell less for cheaper and allow these companies to prove themselves in the market.”

Rush to the summer

Douglas and Galderma lead a cohort of blue-chip names readying public markets listings in Europe. Spanish luxury giant Puig, owner of brands like Jean-Paul Gautier, Carolina Herrera, and Paco Rabanne, is still expected in 1H24, alongside the possible Amsterdam IPO of CVC itself.

German bus operator Flix, Italian luxury shoe brand Golden GooseStada, and Spain’s Hotelbeds are also all targeted for 2024 listings alongside Italy’s Banca Progetto which hopes to launch an IPO just after Easter.

Both the sources close to Galderma and the investor noted that an increased urgency is growing among IPO issuers, given increased noise around the US election in November and the possibility of victory for former US president Donald Trump which, as highlighted in February, could have a profound impact on European ECM.

“When you were planning your deals this year, the obvious window was post-Easter/pre-Summer and I am not sure anyone is really looking at issuing in the second half of the year now, given the US election,” said the investor.

Everyone is looking at Europe’s first two big IPOs of the year and hoping for success. It matters to everyone that they get off to a strong start.

EQT declined to comment on this story.