OC Oerlikon (OERL.S) will sell shares of its drive systems business which makes transmissions for Lamborghini and Ferrari as it raises money to bolster its surfacing and textile machinery units, the Swiss technology group said on Friday.
Oerlikon said the IPO, planned for the third quarter of 2018, would comprise 100 percent of shares in the new business to be called GrazianoFairfield, if the greenshoe is exercised in full.
The drive systems segment is Oerlikon’s second-biggest after its surface solutions business.
It includes Italian unit Graziano that makes components for sports cars and tractors and its U.S.-based Fairfield Manufacturing unit, which has operations in India and China and makes gears and custom drives for construction, mining equipment and oil and gas production.
Operating margins from GrazianoFairfield have been slimmer than those in Oerlikon’s surface solutions business, prompting speculation for years that the unit was a disposal candidate.
“We want to invest the money — the balance sheet we have and what is coming on top into our business — into the development of our core business,” Oerlikon Chief Executive Roland Fischer said on a call with reporters.
This would be the seventh initial share offering or listing this year on the SIX Swiss Exchange.
Analysts at Baader Helvea said the IPO would likely boost Oerlikon’s net cash position up to about 1 billion Swiss francs ($1 billion), giving it up to 2 billion francs for potential acquisitions.
Beyond that, Oerlikon has “the option to give some cash back to shareholders”, Baader analyst Reto Amstalden wrote. “The divestment of Drive Systems should be taken as positive.”
Oerlikon boss Fischer said he does not expect the simmering trade row between the United States and Europe to weigh on the drives business, though he is uncertain how the situation will look in six months, should hostilities intensify.
Oerlikon is seeking to maximize the IPO’s value, as the drives unit’s revenue is gathering pace after a tough patch.
As part of a dual track divestment process, the company is also continuing talks with potential buyers of the unit, after attracting initial interest from peer Danaher (DHR.N), as well as buyout groups such as 3i, Bain, Advent and CD&R, people familiar with the matter said.
Drive sales in the first three months of 2018 surged 23 percent to 209 million francs. Its operating profit margin was 12.4 percent, up from 8.4 percent in the first quarter of 2017, but trailing the surface technology business’s 19.1 percent margin.
Oerlikon is 41 percent owned by Russian billionaire Viktor Vekselberg, who is targeted by U.S. sanctions linked to alleged meddling in the 2016 presidential election.
Still, Fischer does not anticipate the oligarch’s ties to the company to impact IPO demand among potential GrazianoFairfield shareholders.
Oerlikon’s current drive systems segment CEO Bernd Matthes will be CEO of GrazianoFairfield.
UBS is sole global coordinator and bookrunner, while Berenberg, Jefferies, Vontobel and Zuercher Kantonalbank are co-bookrunners. Kepler Cheuvreux and MAINFIRST are co-managers.