Friday, November 9th 2018, an historical moment for the Italian financial industry occurred: the first Italian healthcare IPO. GHC is the protagonist of this groundbreaking event. It is noteworthy, then, to analyze its business before diving into the transaction details.
GHC- Garofalo Health Care SpA, headquartered in Rome and led by Maria Laura Garofalo, is an Italian firm leader in the private accredited healthcare sector. Its strongpoints are several: first of all, it is characterized by territorial diversification, as it has 18 facilities located in the most virtuous north and center Italian regions, where experienced professionals do research and have a direct contact with patients. The wide range of service it is able to provide represent another significant strength. Indeed, they are specialists in all levels of surgery, ranging from the most complex to the simplest, even in emergency situations. In addition, motoric, neurological cardiology and nutritional rehabilitation and psychiatry knowledge are also part of its expertise. Finally, it even has diagnosis centers.
As the company desires to fuel its growth thanks to M&A transactions, necessary to constantly improve the level of services provided (the CEO declared that some target companies have already been identified), funds are needed, and the IPO turned out to be the best way to go. The decision of going public has also been motivated by GHC’s aspiration to enhance its geographical diversification and increase its international visibility.
On November 1st, Consob (the Italian commission regulating the Stock exchange) approved the memo for the admission to negotiations of GHC’s common stock on the MTA (Mercato Telematico Azionario i.e. the Italian electronic stock exchange), 100% reserved to Italian and foreign institutional investors (ISIN code: IT0005345233). GHC offered up to 20 million shares, equal to 25% of the shareholders’ equity after the capital increase, plus a greenshoe option (also called over-allotment option) equal to 10% of the offer (2 million shares). The use of the greenshoe is very popular, as it is a legal mechanism for an underwriter to stabilize the price of new shares. This reduces the risk of their trading below the offer price after the IPO, which would damage the commercial reputation of both issuer and underwriter). Secondly, it grants the underwriters some flexibility in setting the final size of the offer based on post-offer demand for the shares.
The ownership wanted to retain a significant control over the company and this is the main reason why it turned down the opportunity to list on the STAR segment of the Italian stock exchange, which requires a higher floating rate (at least 35%). That segment (with high requisites) is reserved for companies with a market cap between €40 million and €1 billion, with excellence features: they have to meet stringent rules on liquidity, transparency and corporate governance. The IPO price ranged from €3.34 to €3.67, resulting in a total value of €200.4 – €220.2 million.
Starting from November 1st until November 6th, the offer period took place, while the payment and the debut on the Italian stock exchange occurred on November 9th. The moment did not seem to be the best one, due to the political and financial instability that is characterizing the Italian market. Nevertheless, GHC is an example of how investors are still able to recognize an Italian excellence: the demand exceeded the supply by three times. However, the company encountered many issues, as pointed out by the major shareholder and CEO, Maria Laura Garofalo, mainly correlated to the rising spread and the bearish trend that Italian markets are facing nowadays.
The peculiarity of this transaction is the anchor investor: the London-based fund Peninsula Capital, attracted by the acyclical business and the relatively cheap price with respect to GHC’s competitors, decided to invest no less than €27.3 million, at the lowest price of the IPO range. In this case, after the execution of the greenshoe option, the fund would control slightly less than 10%.
Credit Suisse and Equita SIM worked on the transaction as Global Coordinators and Joint Bookrunners. Equita was involved in the transaction also as a Financial Sponsor, while Lazard was GHC’s Financial Advisor. Gianni, Origoni, Grippo, Cappelli & Partners, Shearman & Sterling acted as Legal Advisors; Linklaters, on the other hand, was Legal Advisor for the Joint Global Coordinators and for the Financial Sponsor. Studio Associato Tributario Bagnera & Associati provided Fiscal Advisory and EY worked as Auditing Firm.
GHC- Garofalo Health Care SpA, headquartered in Rome and led by Maria Laura Garofalo, is an Italian firm leader in the private accredited healthcare sector. Its strongpoints are several: first of all, it is characterized by territorial diversification, as it has 18 facilities located in the most virtuous north and center Italian regions, where experienced professionals do research and have a direct contact with patients. The wide range of service it is able to provide represent another significant strength. Indeed, they are specialists in all levels of surgery, ranging from the most complex to the simplest, even in emergency situations. In addition, motoric, neurological cardiology and nutritional rehabilitation and psychiatry knowledge are also part of its expertise. Finally, it even has diagnosis centers.
As the company desires to fuel its growth thanks to M&A transactions, necessary to constantly improve the level of services provided (the CEO declared that some target companies have already been identified), funds are needed, and the IPO turned out to be the best way to go. The decision of going public has also been motivated by GHC’s aspiration to enhance its geographical diversification and increase its international visibility.
On November 1st, Consob (the Italian commission regulating the Stock exchange) approved the memo for the admission to negotiations of GHC’s common stock on the MTA (Mercato Telematico Azionario i.e. the Italian electronic stock exchange), 100% reserved to Italian and foreign institutional investors (ISIN code: IT0005345233). GHC offered up to 20 million shares, equal to 25% of the shareholders’ equity after the capital increase, plus a greenshoe option (also called over-allotment option) equal to 10% of the offer (2 million shares). The use of the greenshoe is very popular, as it is a legal mechanism for an underwriter to stabilize the price of new shares. This reduces the risk of their trading below the offer price after the IPO, which would damage the commercial reputation of both issuer and underwriter). Secondly, it grants the underwriters some flexibility in setting the final size of the offer based on post-offer demand for the shares.
The ownership wanted to retain a significant control over the company and this is the main reason why it turned down the opportunity to list on the STAR segment of the Italian stock exchange, which requires a higher floating rate (at least 35%). That segment (with high requisites) is reserved for companies with a market cap between €40 million and €1 billion, with excellence features: they have to meet stringent rules on liquidity, transparency and corporate governance. The IPO price ranged from €3.34 to €3.67, resulting in a total value of €200.4 – €220.2 million.
Starting from November 1st until November 6th, the offer period took place, while the payment and the debut on the Italian stock exchange occurred on November 9th. The moment did not seem to be the best one, due to the political and financial instability that is characterizing the Italian market. Nevertheless, GHC is an example of how investors are still able to recognize an Italian excellence: the demand exceeded the supply by three times. However, the company encountered many issues, as pointed out by the major shareholder and CEO, Maria Laura Garofalo, mainly correlated to the rising spread and the bearish trend that Italian markets are facing nowadays.
The peculiarity of this transaction is the anchor investor: the London-based fund Peninsula Capital, attracted by the acyclical business and the relatively cheap price with respect to GHC’s competitors, decided to invest no less than €27.3 million, at the lowest price of the IPO range. In this case, after the execution of the greenshoe option, the fund would control slightly less than 10%.
Credit Suisse and Equita SIM worked on the transaction as Global Coordinators and Joint Bookrunners. Equita was involved in the transaction also as a Financial Sponsor, while Lazard was GHC’s Financial Advisor. Gianni, Origoni, Grippo, Cappelli & Partners, Shearman & Sterling acted as Legal Advisors; Linklaters, on the other hand, was Legal Advisor for the Joint Global Coordinators and for the Financial Sponsor. Studio Associato Tributario Bagnera & Associati provided Fiscal Advisory and EY worked as Auditing Firm.
During the first day of trading, the price was set for €3.34 per share (the lowest point in the IPO range). A few hours after the opening bell, the stock reached €3.72, up 11.36%, confirming the strong interest shown by the enormous demand. The closing price, after the first trading day, set at €3.65 per share (+9.28%), as shown by the graph.
GHC, initially deeming the possibility of going public in the STAR segment of the Italian stock exchange, is now valuating this opportunity, which requires 35% of floating rate. This would bring a further capital increase, as well as a higher level of prestige, since this segment can be seen as the elite club of the Italian publicly listed companies. We will see if in the incoming days the bullish trend will be preserved and investors will continuously bet on GHC.
Francesco Baggini
GHC, initially deeming the possibility of going public in the STAR segment of the Italian stock exchange, is now valuating this opportunity, which requires 35% of floating rate. This would bring a further capital increase, as well as a higher level of prestige, since this segment can be seen as the elite club of the Italian publicly listed companies. We will see if in the incoming days the bullish trend will be preserved and investors will continuously bet on GHC.
Francesco Baggini