Financial Times (Saturday, October 30, 2010)

By Courtney Weaver and John O’Doherty

Shares in AZ Electronic Materials rose 6 percent on the first day of conditional trading on Friday, after the chemicals group priced its London-listed shares at 240p, the middle of the range it had set.

The price values the Luxembourg-incorporated company at £914m with trading on the main market to commence officially on Wednesday. Shares in AZ, which makes chemicals used in semiconductors and flat screens, closed at 255p, up 15p.

The initial public listing is raising £382m with 34 percent coming from the sale of existing shares and the remainder from new shares. UBS, Goldman Sachs, and Deutsche Bank were join sponsors and bookrunners of the IPO. Carlyle Group and Vestar Capital Partners, the group’s private equity owners, will each retain shareholdings of 21.4 percent after the float, while the group’s managers will hold 8.7 percent.

Private equity-backed groups, once the darlings of City investors, are now having a tougher time coming to market as many peers have underperformed. Shares in Promethean World, the educational IT provider, have fallen more than 30 percent since the company’s march offering, while NXP, the Dutch chipmaker, has dropped 6 percent since listing on Nasdaq in August. Bankers working on the AZ deal said they believed the offering could be a trigger for other private equity controlled groups to try to tap the market again following a slew of cancelled or postponed offerings.

But a person close to the deal said that market conditions were favourable for AZ. For future issuers “an external shock or some macro event could negatively influence the environment”, the person said.

Geoff Wild, chief executive of AZ, said the company was “delighted with the outcome of the IPO, which received an excellent response from major institutions and demonstrates investors’ confidence in our business.”

The company makes 70 percent of its revenues in Asia but chose London for the offering because of the City’s concentration of institutional investors covering specialty chemicals. It has more than doubled earnings before interest, tax, depreciation and amortization over the past few years thanks to increasing demand for its chemicals found in electrical appliances such as Apple’s iPad.