WE Soda has abandoned plans for a $7.5 billion London initial public offering, dealing a fresh blow to Britain’s equity capital market, which has struggled to attract large listed companies in recent years.
The U.K.-based group, the world’s largest producer of natural soda ash, blamed the decision on “extreme caution by investors in London”, preventing it from obtaining the valuation it was seeking.
“Investors, especially in the UK, remain extremely cautious about the IPO market,” WE Soda chief executive Alasdair Warren said in a statement on Wednesday.
WE Soda, which has two production sites in Turkey and planned to become a “big fish” in London’s relatively small capital market, scrapped its listing plans after finding the market was seeking to pay about 30% less than it had hoped, According to three sources familiar with the matter.
Soda ash is used in industrial processes such as glass production and is an integral part of products ranging from batteries to detergents.
The listing of the company, controlled by Turkish media and industrial tycoon Turgay Ciner, will be Britain’s biggest in 2023, with the group expected to join the FTSE 100.
However, company executives mishandled discussions with investors, fueling concerns about management taking a fractional stake in the group, a person familiar with the matter said. Prior to joining WE Soda, Warren worked as a senior capital markets banker at Goldman Sachs and Deutsche Bank in London.
WE Soda’s decision to pull out of its U.K. IPO is the latest setback for London stocks, which have struggled in recent years as big companies opt to list on big venues such as Wall Street. Only four London-listed companies raised just £81m in the first quarter, the sixth-worst quarter for IPOs in the UK capital since 1995.
Other large industrial companies in London have withdrawn their listings in recent years due to the turbulent market environment. In 2021, private equity group Advent explored a London listing of factory parts supplier Rubix, raising 850 million euros before canceling plans.
Meanwhile, chip designer Arm has rejected the government’s call for a U.K. listing, and CRH, the world’s largest building materials group, plans to move its listing to Wall Street.
The failure of WE Soda’s listing is a setback for Rishi Sunak’s ambitions to boost London’s reputation as a destination for big IPOs.
But government officials insist the decision has not dealt a heavy blow to the City’s reputation, noting that issuance in most major markets has been low in recent months.
A banker familiar with WE Soda’s process said that while the company generously offered to pay more than $500 million in dividends, investors were not prepared to buy at the prices the company was seeking.
“A deal is possible, but the price level is something the owners don’t intend to do,” the person said. “We shouldn’t be writing off the entire IPO market, but it’s pretty hard.”
Warren told the Financial Times on Tuesday that the company had received “substantial” interest, with around 300 investor meetings.
He said WE Soda faced three challenges for investors: poor IPO market conditions, insufficient knowledge of the soda ash industry and convincing them of the sustainability of its profit margins in the coming years.
“The question is about caution in the IPO market, and the ‘discount’ they demand for that caution,” he said.
Responding to the news, City Minister Andrew Griffith said: “We continue to attract some of the most innovative and largest companies in the world with unique characteristics and competitive Listed on the global capital market.
“The UK is undertaking ambitious reforms to its capital market rules, including through the Edinburgh Reform, to build on our continued success as Europe’s leading investment center and the world’s second largest.”
Additional reporting by Jim Pickard