Big brake

Analysts like the Knorr-Bremse IPO

München: Knorr-Bremse AG
Give me a brake, mate. Source: dpa

The multibillion-euro IPO of a minority stake in German brake manufacturer Knorr-Bremse is in the home straight. Final details of the share flotation will be released on Monday, with the total volume likely to exceed €3 billion ($3.5 billion), making it the sixth-largest flotation in German history.

Senior Knorr-Bremse executives met with 30 investors and analysts in London in early September, Handelsblatt has learned. CEO Klaus Deller and other key managers spent three hours laying the case for investing in the Munich-based company, the world’s leading manufacturer of rail and commercial vehicle braking systems.

Final details of the flotation are being worked out in collaboration with underwriting banks Deutsche Bank, JP Morgan and Morgan Stanley. They will release details on Monday on the price spread and proportion of shares placed privately ahead of the float.

Sources say private investment funds including Blackrock and state funds including Singapore’s Temasek showed strong interest at the London meetings.

Healthy payout spurs interest

Analyst reports from Berenberg, Commerzbank, Deutsche Bank and JP Morgan are all positive on the Knorr-Bremse offer. Commerzbank has the highest estimate of the company’s value, assessing its post-float market cap at between €13.4 and €17.2 billion. Berenberg suggests a slightly lower range of €13.3 and €15.1 billion.

Between 20 and 30 percent of Knorr-Bremse shares will be included in the float. At Commerzbank’s valuation, that suggests volume could exceed €5 billion, possibly exceeding March’s float of Siemens health-equipment division, Healthineers. Insiders say the brake manufacturer hopes to tempt investors with a dividend payout ratio of 40 percent to 50 percent.

The IPO will mark a shift for the company, with controlling shareholder Heinz Hermann Thiele loosening his hold. Mr. Thiele, 77, acquired the company over 30 years ago and is now one of Germany’s richest self-made businessmen.

Since then, the company has risen steadily: In 2017, revenue reached €6.2 billion, with operating profit at €1.3 billion. This year, this is expected to rise to around €6.5 billion and €1.3 billion. Deutsche Bank predicts “above-average profitability,” and revenue growth of around 5 percent to 2021. The company is almost entirely debt-free.

Mr. Thiele served as CEO for decades before becoming chair of the advisory board, a position he left three years ago. However, a possible sale of the company to ZF Friedrichshafen or Bosch failed to materialize because of his reluctance to cede majority control.

Peter Köhler is a Handelsblatt editor in Frankfurt, reporting on banks, private equity firms, venture capital and corporate funding. Robert Landgraf is Handelsblatt’s chief correspondent for the financial markets. To contact the authors: koehler@handelsblatt.com, landgraf@handelsblatt.com

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