FTSE 100 welcomes rare IPO and return of this old economy stock
31st May 2023 14:10
by Graeme Evans from interactive investor
After struggling to attract high-profile IPOs, news that a billionaire Turkish family has chosen London to list its business is a massive boost. They’ll join companies promoted in the latest FTSE reshuffle.
The likely return of industrial stalwart IMI (LSE:IMI) and plans for a £6.5 billion retail investor-backed IPO by WE Soda means no loosening of the “old economy” ties of the FTSE 100 index.
IMI, the valves and flow control equipment firm formerly known as Imperial Metal Industries, has been out of the top flight since 2014, but is likely to return at the expense of British Land (LSE:BLND) when the latest quarterly reshuffle is announced by FTSE Russell tonight.
- Invest with ii: Top UK Shares | Share Tips & Ideas | Open a Trading Account
It is currently the largest stock in the FTSE 250 index with a valuation of more than £4.2 billion, having risen by more than a fifth this year on the back of nine consecutive quarters of organic growth and improved margins in all three of its divisions.
The plans by WE Soda, whose facilities near Ankara in Turkey last year produced five million metric tonnes of soda ash and sodium bicarbonate, are a welcome boost to a London market starved of major new listings since 2021’s boom year for IPOs.
The nearest in scale has been listed acquisition vehicle Admiral Group (LSE:ADM), which earlier this month raised $550 million through the placing of shares in Europe’s second largest IPO this year.
Another recent newcomer is the GKN automotive and powder metallurgy business Dowlais Group (LSE:DWL), valued at £1.9 billion in the FTSE 250 after its demerger from Melrose Industries.
- Insider: these FTSE 100 directors buy £500k of shares on the cheap
- The FTSE 100 dividend stocks handing £10bn to shareholders in June
- Richard Beddard: my portfolio’s biggest holding gets a maximum score
The new arrivals have offset plans by building materials giant CRH (LSE:CRH) to list in New York and the disappointment that SoftBank has chosen Wall Street rather than London for the stock market return of Cambridge-based chip designer Arm Holdings.
The moves come as an AI-fuelled boom pushes the tech-focused Nasdaq Composite to its highest level this year, with a 25% improvement in contrast to the broadly flat performance of the Dow Jones Industrial Average and FTSE 100 index so far in 2023.
Investors have long complained about the poor tech exposure of London’s leading index, although the leaning towards the old economy proved more than a little helpful in 2022 as heavyweights BAE Systems (LSE:BA.), BP (LSE:BP.) and AstraZeneca (LSE:AZN) came to the rescue of investors.
WE Soda, which expects to have a free float of up to 15% of shares following the IPO, describes its marketplace as one characterised by “long-term structural, non-cyclical growth”.
The soda ash is found in a wide variety of industrial processes with no viable substitute, including the manufacture of products that play a vital role in everyday modern life such as flat glass, glass bottles and photovoltaic glass for solar panels.
It is also used in the manufacture of lithium carbonate, which is used in electric vehicle batteries.
- Sector Screener: three travel & leisure shares with long-term appeal
- Daily Trading Flash: 10 most-traded shares 31 May 2023
- Have AIM stocks just become attractive again?
The company describes itself as one of the lowest cost producers of soda ash globally, boasting industry leading operating margins of about 60%. In 2022, WE Soda reported revenue of $1.8 billion and adjusted earnings of $838 million.
It aims to more than double production by 2030, including through two investment projects located in Wyoming, US, and at one of its existing facilities in Turkey.
Chief executive Alasdair Warren said the company had become a global leader in less than 20 years, both in terms of scale as well as sustainability. He added today: “WE Soda is an extraordinary business supplying essential products to support the energy transition.”
The company is wholly owned by the Ciner Group, one of Turkey’s largest industrial groups with operations in various sectors. Pricing details of the flotation are still to be announced, but with the company reportedly set for a valuation of around £6.5 billion, the move would be sufficient for inclusion in the FTSE 100 index.
WE Soda is also considering making a public offer of shares to retail investors in the UK through the PrimaryBid platform.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.