BAWAG advances IPO preparations, Morgan Stanley helps, say sources: Reuters

BAWAG PSK is moving ahead with preparations for an initial public share offer that could value the Austrian bank at up to 5 billion euros ($5.6 billion) and has picked a lead organizer, people close to the matter said.

Its majority owner, private equity investment group Cerberus, has recruited Morgan Stanley to help with global coordination of the share sale, which could launch as early as autumn, the sources said.

However, no official mandates are out yet and more banks will be added in coming weeks, the sources said, adding Goldman Sachs and Citi also stand a good chance of being part of the bank line-up.

Rothschild is seen as having an edge over Lazard and Evercore to take the role of a so-called independent IPO adviser, which will help with the selection of bookrunners, they added.

BAWAG and the investment banks declined to comment.

Cerberus held talks with investment banks in New York in late April to hear their proposals for an exit, they said.

Cerberus acquired BAWAG with other investors for 3.2 billion euros in 2007. It now owns 52 percent while GoldenTree Asset Management has a 40 percent stake.

The investors could opt to sell a stake of 20-30 percent in a potential IPO, which could value the bank at 4 to 5 billion euros.

Although no final decision on the location has been taken, the company is expected to have Vienna as its primary listing location with a secondary listing in either Frankfurt or London.

At 4.5 billion euros, BAWAG would be valued at roughly 1.5 times its book value – in line with the valuation of Nordic banks but at a premium to most banks in continental Europe.

BAWAG does not comment on its owners’ potential plans. Cerberus and GoldenTree declined to comment.
Shares in European banks on average trade just below book value, according to Thomson Reuters data. Among Austrian lenders, Erste Group trades at 1.03 times and Raiffeisen Bank International at 0.7 times book value.

Unlike Austrian peers with large operations in central and eastern Europe, BAWAG focuses on western markets.
BAWAG’s 2017 targets include a return on equity (ROE) above 15 percent and making more than 500 million euros in profit before tax. In 2016 its ROE was 15.9 percent.

European banks on average had an ROE of 3.3 percent in the last quarter of 2016, according to the European Banking Authority.

“The sentiment in the market is very positive but (the decision) wasn’t because of catching the market at the right time,” a person close to the matter said. “The bank has been preparing for a strategic action for some time. It had (an exit) process two years ago, but was probably too early in the game.”

BAWAG has margins ranging in the top 5 percent among ECB-regulated banks, so investors have increasingly come to see its performance as credible, the person added.