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DKSH, a Swiss company that earns 96% of its revenues in Asia, has announced plans to list on the SIX Swiss Exchange. The size of the initial public offering is yet to be revealed, but with a minimum 25% free float, it is likely to be well over Sfr1 billion ($1.1 billion). The company already has a small over-the-counter listing on the Berne exchange, but this will be taken out as part of the IPO exercise.
The company calls itself a market expansion services group, which in effect means it helps companies enter new markets. In particular, it provides access to Asian markets for companies within the region and in Europe. It sources goods, markets them, sets up sales channels and can organise onshore logistics. In 2011 it had revenues of Sfr7.3 billion and profits of Sfr238 billion, a rise of 22% over 2010.
The company has appointed Berenberg, Credit Suisse, Deutsche Bank and UBS as joint bookrunners, while UBS and Deutsche have secured global coordinator roles. According to sources within the bookrunner group, analysts are currently writing research reports prior to setting the price range for the IPO in early March. A roadshow will follow with pricing of the deal expected towards the end of March.
Sources said the sale will consist of more than the 25% minimum free-float as mandated under Swiss listing rules, although the sale will consist of existing shares. The company has a complex shareholding structure, formed as it was by an original merger of four different Swiss trading houses. The fifth generation of family members are now in the register. In 2008, fresh equity was brought into the company to allow for some family members to exit. This equity came from a group of blue-chip Swiss industrialists and family offices, and they were offered an IPO liquidity event to entice them into the company. This IPO is that liquidity event.
Investors might discount the IPO as the sale will be of existing shares, rather than new shares. They will also find it difficult to find any companies that could count as full comparables with which to match valuations. Asian companies such as Li & Fung have some similarities with DKSH’s distribution business, while in-country specialists such as Thai company Berli Jucker are similar from a national point of view. Swiss global services companies such as Kuhne & Nagel or SGS offer a comparative Swiss governance combined with Asian growth story. Even so, bookrunners will have their work cut out explaining the company, its structure and its business model.
“We are conscious of the fact that an IPO will expose DKSH to public scrutiny to a far greater degree than in the past,” says Joerg Wolle, president and chief executive of DKSH in Zurich. “We see this move as an opportunity to sustainably enhance DKSH’s brand recognition among existing and potential new clients and customers, as well as favouring us in the labour market when recruiting top talent. In addition, it will help us to sharply raise the profile of our company among our existing and potential shareholders.”
The choice of listing venue might provide something of a challenge and goes against the current trend for global companies with extensive business interests in Asia to also list there. Prada, Samsonite, Rusal and even Glencore attest to this trend. But sources in the bookrunner group said that DKSH will be able to get a governance premium from its Swiss listing, which could offset some of the other complexities in its story.
