WE Soda withdraws £7.5bn London IPO, a blow to the City

WE Soda’s plans to launch a $7.5bn London IPO have been abandoned, a blow to the UK equity capital markets which have struggled in recent years to attract major listings.

The UK-based company, the largest producer of natural soda ash in the world, blamed its decision on the “extreme caution” shown by investors in London, which prevented it from achieving the valuation that it sought.

Alasdair Warrren, the chief executive of WE Soda, said in a statement released on Wednesday that “investors remain very cautious, especially in the UK” about the IPO markets.

WE Soda has two production facilities in Turkey, and was planning to become “a big fish” on London’s smaller capital market. However, it cancelled its planned flotation after finding that the market wanted to pay about 30% less than what it had expected, according to people familiar with the situation.

In industrial processes such as glass production, soda ash is a key component. It is also used in many products from batteries to detergents.

The company’s listing, controlled by Turgay Ciner – a Turkish media mogul and industrialist – was expected to be Britain’s largest flotation in 2023, with the group anticipating to join the FTSE 100.

A person with knowledge of the situation said, however, that senior executives had handled discussions with investors in a way that was not appropriate, which exacerbated concerns over management owning zero shares. Warren was a senior capital market banker with Goldman Sachs in London and Deutsche Bank.

WE Soda pulling out of its UK IPO was the latest blow to London’s equities markets, which have struggled over the past few years due to big companies choosing to list in large venues like Wall Street. Only four London listings were made in the first quarter. This was the lowest quarter of IPOs since 1995.

London has been hit by other large industrial companies withdrawing their listings due to turbulent market conditions in recent years. Private equity group Advent considered taking factory parts provider Rubix public in London by 2021. The plan was to raise €850mn.

The collapse of WE Soda’s listing is a blow to Rishi Sunak’s plans to enhance London’s reputation as a place for large IPOs.

Government officials, however, insisted the decision did not represent a major blow to the reputation of the City. They pointed out that there was a recent period in which issuance had been low in the majority of the largest markets.

Banker familiar with WE Soda’s process says investors are not willing to buy the product at the price the company is looking for despite its generous offer of more than $500mn in dividends.

The person stated that “the transaction was possible, but at a level of price where the owner would not do it.” “We shouldn’t write off the entire IPO industry but it is very difficult.”

Warren said on Tuesday the company received “massive interest” and held about 300 investor meetings.

He said that WE Soda faced three challenges in attracting investors: low understanding of soda ash, poor IPO conditions and convincing them about the sustainability of its profit margins.

He said, “This is a question of caution regarding the IPO market. And ‘what discount’ are they demanding for this caution.”

Andrew Griffith, the City Minister in response to this news, said that we continue to attract the largest and most innovative companies in the entire world. Firms will also have their own unique characteristics and reasons for listing on capital markets around the world.

The UK is implementing ambitious reforms in the rules that govern its capital markets. This includes the Edinburgh Reforms, which will build on the success of the UK as Europe’s largest hub for investment and second-largest globally.