IPO book building process for Pegas Nonwovens closes today at 18h CET. Company’s activity is hygiene applications – consumer products. There are 2,020,000 new shares and 3,264,250 existing shares of Pamplona Capital Partners offered. The total post-IPO number of shares will reach 9,439,400. Free float is thus expected to reach up to 56%. Price range is set for EUR 21.5 – 27.0 and company plans to get net proceeds of EUR 43.1m which should be used mainly for debt repayment. The pricing will be released on Friday, 15 December.
Our view:
Pegas Nonwovens is the second largest nonwovens manufacturer in Europe for hygiene applications with 19% market share. Strong correlation between their products and country’s per capita GDP is among its advantage mainly if we take into account targeted markets. These are CEE markets, Russia, Middle East and North Africa, which should see higher economic growth in next years. Although the competition is strong in the segment pushing down the margins, technological edge could be competitive advantage for the company. EBITDA margin reached 37.2% in 2005 and 43.1% in 1H2006 (boosted by debt revaluation). Based on 1H2006 figures the low-high range of P/E is 9.5-12.0 and EV/EBITDA 7.3-8.5. Currently net debt/EBITDA ratio stands at 6.8x, which is rather high. Company’s overdependence on P&G as a major purchaser (over 50%) needs to be considered with caution as brings certain business risk.