WE Soda blames ‘cautious investors’ for dropping $7.5bn London IPO

WE Soda has abandoned plans for a $7.5bn London initial public offering in a fresh blow to UK equities capital markets that have struggled to attract marquee listings in recent years.

The UK-based group, which is the world’s largest natural soda ash producer, blamed the decision on “extreme investor caution in London” that prevented it from garnering the valuation it had sought to achieve.

In a statement on Wednesday, WE Soda chief executive Alasdair Warren said that “investors, particularly in the UK, remain extremely cautious about the IPO market”.

WE Soda, which has two production sites in Turkey and had planned to become a “big fish” in London’s relatively smaller capital market, cancelled its planned float after it found the market was seeking to pay roughly 30 per cent less than it had hoped for, according to three people familiar with the matter.

Soda ash is used in industrial processes like glass production, and is a component in products ranging from batteries to detergents.

The listing of the company, which is controlled by Turkish media and industrial mogul Turgay Ciner, was set to be the UK’s biggest flotation of 2023 with the group expecting to join the FTSE 100.

However, a person familiar with the matter said that senior executives at the company had mishandled the investor roadshow, compounding concerns about management holding zero shares in the group. Before joining WE Soda, Warren worked as a senior capital markets banker at Goldman Sachs and Deutsche Bank in London.

This question is this issue of caution in terms of the IPO market and ‘what discount’ they demand for that caution

WE Soda’s decision to back out of the UK IPO is the latest setback to London’s equities market, which has struggled in recent years as big companies have chosen to list on large venues such as Wall Street. There were just four London listings in the first quarter, raising only £81mn, the sixth-worst quarter for IPOs in the UK capital since 1995.

London has suffered from other large industrial companies pulling their listings in recent years because of turbulent market conditions. In 2021, private equity group Advent explored taking factory parts supplier Rubix public in London, raising €850mn before scrapping the plans.

Meanwhile, Arm, the chip designer, rejected an appeal by the government to list in the UK and CRH, the world’s largest building materials group, plans to switch its listing to Wall Street.

A banker familiar with the process said investors were not prepared to buy at the price that the company was looking for, despite the generous offer to pay more than $500mn of dividends.

“The transaction was possible but at a price level where the owner was not going to do it,” the person said. “We should not write off the entire IPO market but it is pretty difficult.”

Warren told the Financial Times on Tuesday that the company had received “massive” interest, holding about 300 investor meetings.

He said WE Soda had faced three challenges with investors: poor IPO market conditions, low understanding of the soda ash industry and convincing them of the sustainability of its margins in the coming years.

“This question is this issue of caution in terms of the IPO market and ‘what discount’ they demand for that caution,” he said.