EQT faces selldown dilemma as realisation pressure dawns

At the end of January, the sponsor sold a 2.5m share stake in Belgian chemical distributor Azelis, which it listed in October 2021, at a 3.9% discount.

The sale was the first in a while for EQT, which had previously not done any European ECM transaction, either IPO or follow-on, in over a year, according to Dealogic data.

EQT is coming back to market with work to do.

It retained 116.9m shares in Azelis, representing 49.99% of the total number of shares issued by the company after the January 24 block trade.

The sponsor still holds a large stake in German open-source solutions provider Suse, which it listed in May 2021 and Swedish cooling solutions group Beijer Ref, acquired through a PIPE transaction in December 2020.

"We definitely expect more secondary activity from EQT in the second half," said an ECM banker, adding that it is among sponsors rethinking positions in portfolio companies that listed in the past few years and are actively looking to sell down further in due course.

Pressure building
The first two assets sit within EQT's 2018-vintage EQT VIII, so are starting to be under the fund pressure of realisation.

There are also some IPO candidates in that portfolio like Swiss skincare group Galderma and German prosthetics manufacturer Ottobock which remain in a holding pattern until there is an improvement in IPO market valuations.

Five years into the vintage, EQT VIII has realised EUR 1.9bn of invested capital out of EUR 9.2bn with the value of realisation at EUR 5.9bn out of EUR 21.3bn, according to its full-year reports.
During better times, EQT has typically exited assets quickly through ECM transactions.

AcadeMedia, HusCompagniet, and Terveystalo, all EQT VI assets, were sold within around a year from IPO to final exit through a block trade, according to Dealogic data. EQT VI is now fully realised at a gross MOIC of 2.6x.

Selling under IPO price
The decision to keep selling down recently listed assets isn't easy. Suse is trading 41% down since its debut and Azelis is down 6% and while secondaries are expected, issuances have so far not matched projections.

Secondary selldowns have shorter lead times than IPOs, but sellers have largely let January slip, meaning advisers are gearing up to test the temperature for the end of the first quarter and the beginning of the second.

One banker said he had expected more secondary ECM activity since the start of the year, adding that valuations and stocks are still not where many sellers want them.

There is scope for assets to go up and EQT will almost certainly hope Suse returns to around IPO price but even if not, it can still go higher; the stock is up over 30% from its most recent low in September.

The banker added that many 2021 IPO stocks are unlikely to return to the sale price but sellers, like EQT, can find comfort at new levels.

This source highlighted a disconnect still prevalent between sellers and buyers. Investors have left behind last year's performance, and are conscious interest rates could rise but without shocks.

Sponsors like EQT, meanwhile, are expected to sell down though not below certain levels, even though there is appetite on the public side.

One saving grace for EQT could be Beijer Ref, while it sits in a different fund, the 2020-vintage EQT IX, the share price is up around 50% since the sponsor became the largest shareholder via a PIPE in December 2020.

It is always tough to sell when you think your asset might be worth more. But at some point, EQT might just have to bite the bullet.

EQT declined to comment.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• GPs
• Investments
• Exits
• Nordics
• DACH
• EQT
• Sweden