FINANCING ALTERNATIVES THROUGH INITIAL PUBLIC OFFERINGS (IPO) - RIGA | 12 APRIL 2019 - Top101.lv
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FINANCING ALTERNATIVES THROUGH INITIAL PUBLIC OFFERINGS (IPO) RIGA | 12 APRIL 2019
SELECTED PROCESS ISSUES
AND CASE STUDY
€669.5 MILLION IPO OF NOVA LJUBLJANSKA BANKA
2NLB IPO TIMELINE PDIE ROADSHOW SETTLEMENT
5-6 months
(2 WEEKS) (2 WEEKS) (T+3)
Due Diligence
KICK OFF ANALYST INTENTION TO PRICE RANGE OVERALLOTMENT
MEETING PRESENTATION FLOAT PROSPECTUS PRICING CLOSING CLOSING
SUMMER 2018 17 SEPTEMBER 15 OCTOBER 26 OCTOBER 9 NOVEMBER 14 NOVEMBER 18 DECEMBER
Second attempt –
previous one in 2016 Pre-IPO research €51.50 - €66.00
put on hold in 2017 €51.50 per share €57.20 per share
published per share
DEAL STRUCTURE SYNDICATE
• Rule 144A / Regulation S offering
• Public offering in Slovenia
• Listing of shares on the Ljubljana Stock
Exchange and GDRs on the London Stock Joint Global Joint Bookrunner Co-Lead Manager Domestic Co-Lead
Exchange Coordinators and Manager
Joint Bookrunners
3BACKGROUND • As a condition to the European Commission’s approval in 2013 of a state aid injection to recapitalise NLB,
resulting in the effective state ownership and control of NLB, Slovenia undertook to bring NLB back to public
markets by selling 50% plus one share by the end of 2018.
• Two attempts: started in June 2016, transaction put on hold in 2017, completed in 2018. Last attempt in 2018 –
5 months from launch to closing.
• If the Republic of Slovenia fails to reduce its shareholding in NLB to 25% plus one share by the end of 2019, it
would be forced to sell down through the appointment of a divestiture trustee.
WHAT DID THE IPO • The Republic of Slovenia, acting through Slovenski državni holding, sold 65% of its holdings in NLB (after the
exercise of the over-allotment option).
CONSIST OF? • Admission to trading of :
o shares on the Ljubljana Stock Exchange (Blue Chip Market) and
o global depositary receipts (representing NLB's shares) on the London Stock Exchange.
• A public offering to institutional and retail investors in Slovenia.
• An offering of shares and GDRs to institutional investors in various other jurisdictions, including to qualified
institutional buyers in the United States under Rule 144A.
• Slovenian language price range prospectus approved by the Slovenian regulator combined with the English
translation for the international tranche.
• The largest European banking IPO in 2018, the first IPO in Slovenia in ten years and the largest IPO ever of
a Slovenian company.
• Awarded ‘Deal of the Year 2018’ at CEE Legal Matters Awards.
Financing Alternatives through IPO | 12 April 2019 4LISTING OPTIONS AT THE OUTSET OF THE IPO PROCESS, THERE ARE MANY CRITICAL PATH ISSUES TO CONSIDER AND TO RESOLVE BEFORE THE TRANSACTION
EXECUTION PROCESS CAN BEGIN. PARAMOUNT AMONG THESE INITIAL CONSIDERATIONS IS THE DECISION OF WHERE TO LIST AND HOW TO
STRUCTURE THE TRANSACTION, AS THIS WILL AFFECT NOT ONLY THE TRANSACTION BUT LIFE AS A P
NLB chose this option
• Local listing rules and requirements • Access local and international, more
• Local corporate governance liquid markets
requirements • Expand investor base and lower funding
• Three years of IFRS financials Local Listing Dual Listing costs
International process – diligence / GDR listing in London previously tested
(Local and UK)
• •
comfort / English and local language by many companies
disclosure • Coordination of two regulatory
• Over-allotment and settlement issues processes
• Passporting of the prospectus • Coordination of corporate governance
• Local tax issues and reporting requirements
• Over-allotment and settlement issues
• Foreign rules on governance and • Most liquid market / significant tech and
reporting depending on the listing gaming peers
venue and market • Growth company qualification and
• Possible tax issues with foreign only Foreign Only (UK) NASDAQ / NYSE benefits
listing • Significant dispensation from
• Foreign only investor relations and governance requirements, but
other functions compliance and related costs remain
• Over-allotment and settlement issues • Perception of elevated litigation risk
which can be mitigated through
disclosure
Financing Alternatives through IPO | 12 April 2019 5IPO OFFERING STRUCTURE
LISTING ON LOCAL CONCURRENT LISTING PRIVATE PLACEMENT INSTITUTIONAL AND REGULATORY HOME REGULATOR
STOCK EXCHANGE ON FOREIGN STOCK TO US INVESTORS RETAIL OFFERING FILINGS AND
EXCHANGE SUBMISSIONS
• Importance of local law advice (local offerings in most IPOs of state-controlled companies)
• Rule 144A offering vs Rule 144A / Regulation S offering
• Home regulator under the Prospectus Directive:
• in the NLB IPO, the Slovenian regulator approved the prospectus for the offering of shares and GDRs
• In the Citadele banka planned IPO, the Latvian regulator approved the prospectus for the offering of shares and GDRs
• Local stock exchange listing requirements and approval process
• Settlement and stabilisation mechanics to be coordinated between home country and London
Financing Alternatives through IPO | 12 April 2019 6OFFERS TO US INVESTORS
TO ACCESS THE LARGEST POSSIBLE BUYER BASE AND OBTAIN BEST POSSIBLE PRICING, THE BANKS WILL TYPICALLY RECOMMEND A
RULE 144A / REGULATION S OFFERING ALLOWING FOR A GLOBAL OFFERING FOR INSTITUTIONAL INVESTORS.
A REGULATION S ONLY OFFERING IS ALSO POSSIBLE.
RULE 144A/ REGULATION S REGULATION S ONLY
• In the United States to qualified institutional buyers (QIBS) • Shares are sold outside the United States to qualified
pursuant to Rule 144A investors pursuant to Regulation S only
• Outside the United States to qualified investors pursuant to
Regulation S
Most IPOs of state-owned companies as we’ll as private companies above a certain threshold are structures as Rule
144A / Regulation S offerings, such as Nova Ljubjanska banka, Citadele banka, Port of Talling to name just a few
Financing Alternatives through IPO | 12 April 2019 7KEY CHALLENGES AND SHAREHOLDER DIVIDEND
INNOVATIVE The decision to pay a pre-IPO dividend to the selling shareholder (the Republic of Slovenia) affected the
strategy for the timing of the offering, as it was dependent on ECB approval, as well as for investor marketing
SOLUTIONS IN THE and disclosure.
TRANSACTION LEGAL CHALLENGES
NLB is exposed to potential liabilities in Croatia related to foreign currency deposits held in the bank’s Croatian
branches at the time of the break-up of the former Yugoslavia. The impact of this on the marketing of the IPO
required the Republic of Slovenia to enact new legislation providing for the Slovenian state to compensate
NLB for possible adverse judgments in these proceedings.
STRUCTURAL CHALLENGES
The structure of a public offer of ordinary shares in Slovenia and a concurrent offering of GDRs admitted to
trading on the London Stock Exchange was unprecedented and demanded careful co-ordination between
regulators in the two jurisdictions.
This structure also required the legal teams, together with the underwriters, to develop innovative solutions to
address complex settlement mechanics involving retail and institutional offerings settling both in shares on
the Ljubljana Stock Exchange and in GDRs on the London Stock Exchange, as well as coordinating
stabilisation activities across both lines.
EXPERIENCED COUNSEL
Shearman & Sterling was also able to leverage its experience executing securities offerings in the CEE / SEE
region to navigate the complexities of the concurrent offering of shares in Slovenia and GDRs on the LSE.
The IPO enabled the Republic of Slovenia to meet its commitments to the EC during a time of extreme volatility
and uncertainty in European equity capital markets, generating significant proceeds for the Slovenian state and
ensuring a broad private shareholding to complement the government’s residual stake.
Financing Alternatives through IPO | 12 April 2019 8DUE DILIGENCE
BUSINESS DUE FINANCIAL DUE ACCOUNTING DUE LEGAL AND SPECIALIST DUE BACK-UP OF
DILIGENCE DILIGENCE DILIGENCE DOCUMENTARY DUE DILIGENCE PROSPECTUS
• Auditor comfort letter
DILIGENCE (ENVIRONMENTAL,
• Disclosure / 10b-5
REGULATORY, REAL
• CFO Certificate
letter ESTATE)
• Begins at the outset of the transaction
• Relationship with the state post IPO seen from the disclosure perspective
• Continues until closing, continually monitor status of due diligence
• Reasonable investigation standard (not the M&A style of due diligence process with separate due diligence reports)
• Prospectus is the end result of the due diligence process: all material information should be included in the disclosure document
• Focus on due diligence in particular in Rule 144A offerings: syndicate banks will require from US counsel the so-called “10b-5
letter”. It was delivered on the NLB IPO and planned Citadele banka IPO.
Financing Alternatives through IPO | 12 April 2019 9IPO RESEARCH REPORTS
RESEARCH ANALYST PREPARATION AND DISTRIBUTION: REVIEW PROCESS PRE-DEAL
GUIDELINES RELATE PRESENTATION PUBLICATION OF • Research reports • Issuer reviews INVESTOR
BOTH TO THE CONTENT RESEARCH REPORTS may not be drafts to ensure EDUCATION
AND DISTRIBUTION OF distributed into the factual accuracy
US
RESEARCH REPORTS
• Distribution of
research reports
outside of US
confined to a
limited distribution
window
• Importance of research reports as a price discovery mechanism
• Analyst presentation with management
• New UK IPO model since July 2018 with unconnected analysts designed to encourage unconnected research coverage.
Applied on the NLB IPO.
• Investor education/ PDIE
• No research in US IPOs (buy side research concept)
Financing Alternatives through IPO | 12 April 2019 10PAWEL SZAJA IS A PARTNER IN THE CAPITAL MARKETS PRACTICE OF THE LONDON OFFICE.
Pawel advises underwriters and issuers on equity and debt capital markets as well as M&A and corporate
governance matters. Pawel has extensive experience advising on a wide range of cross-border securities offerings,
including IPOs, privatizations, follow-on offerings, rights issues and other equity and debt capital markets
transactions from Europe, Africa and the Middle East.
Pawel has gained his more than 10 years of experience working in the New York, Frankfurt and London offices of
premier US and UK magic circle firms before joining Shearman in 2014. Pawel spent seven months on secondment
in the ECM Execution group at Credit Suisse in London.
Pawel contributed to Global Legal Insights: Initial Public Offerings (2017 and 2018), published by Global Legal
PAWEL J. SZAJA Group ltd, London, by authoring the chapter on UK capital markets. The guide covers the key steps, legal issues
Partner and market practices involved in the initial public offering process by examining practices in jurisdictions around
Head of CEE/Baltics Desk the world.
LONDON Pawel is cited by leading legal directories Chambers UK 2019 and Legal 500 UK 2019 and recognized as a “rising
T +44 20 7655 5013 star” by IFLR1000 and “Next Generation Lawyer” by Legal 500 UK 2019.
M: +44 7834 433687
Relevant experience:
pawel.szaja@shearman.com
EQUITY CAPITAL MARKETS: initial public offerings, re-IPOs, rights issues, block trades, spin-offs, ADR/GDR structures and
BAR ADMISSION convertible bonds (SEC-registered and Rule 144A/Regulation S), including offerings by ABN AMRO, Endesa, Yandex, TDC, NXP
New York (2008) Semiconductors, Chipita (proposed IPO), Elkem, NLB, Ladbrokes, Laird, New Look (proposed IPO), Irish Residential Properties
England and Wales (2011) REIT, Swissport (proposed IPO), MRH (proposed IPO), Endesa, Basic Fit, Wizzair, Cleopatra Hospital Company, Banque du Caire,
Ireland (2011) Emaar Misr, Citadele banka (proposed IPO), AIB Bank, Waberer's, OSRAM, Premier Foods, Alpha Bank, Autoneum, Western
Refining, BCP, Ardmore Shipping, Banco Popular Español, Basic-Fit, Hispania Activos Inmobiliarios, Grivalia Properties, Marine
EDUCATION Harvest, McMoRan Exploration, Merlin Properties SOCIMI SA, Logista, Espirito Santo Saude, Coface, Banca Carige, Banca
Columbia University, School of Law, LL.M. Popolare dell'Emilia Romagna, Credito Valtelinese, Fidelity National Financial.
Goethe-University of Frankfurt/Main,
Institute for Law and Finance, LL.M. DEBT CAPITAL MARKETS: investment grade and high yield bonds (SEC-registered and Rule 144A/Regulation S), project bonds,
(Finance) bank regulatory capital, commercial papers, including over 50 bond offerings in the United States and EMEA.
Warsaw University, J.D.
PRIVATE AND PUBLIC M&A, including in respect of the merger of Videocon d2h and Dish TV (Asia Pacific's largest direct-to-
LANGUAGES home TV company); the acquisition by a US listed company Wright Medical Group N.V. of IMASCAP, a French company; a
Polish planned public-to-private transaction for a company based in Central and Eastern Europe; the sale by EFG of a stake in Credit
English Libanais; the consortium of investment funds in connection with the acquisition of Eversholt Rail Group in the UK.
German
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