(Bloomberg) -- Shares in Zabka Group SA erased an early surge to close flat, as Europe’s fourth-largest initial public offering this year saw a muted Warsaw debut.
The CVC Capital Partners Plc-backed convenience store chain closed unchanged at its IPO price of 21.5 zloty, giving the firm an implied market capitalization of more than $5 billion, according to Bloomberg calculations.
The stock jumped as much as 9% in the first minutes of trading before drifting back toward its IPO price, which was the top of its targeted range.
The $1.6 billion debut is Poland’s largest since e-commerce marketplace Allegro.eu SA’s record offer in 2020. The Zabka deal was highly anticipated as a test of investor appetite, given a recent listings lull for the Warsaw bourse.
But while the IPO itself saw demand exceed the shares offered by multiple times, the stock market debut of Poland’s ubiquitous 7-Eleven-styled chain comes during a difficult business environment. Price wars between supermarkets have hurt industry profits, raising questions as to how Zabka’s fast pace of store openings will fare.
“Zabka has entered the stock market when general sentiment toward the Polish food retail sector is weak, which limits potential for fast gains,” said Lukasz Wachelko, analyst at Wood & Co. brokerage. “The company needs to prove that it can continue its pace of store openings to address concerns about potential market saturation. Financing costs will be also key for future profitability.”
Zabka’s owners raised 6.45 billion zloty ($1.6 billion) in its IPO, coming at a time when European firms have sought to list before market focus turns to the upcoming US presidential election.
Earlier this month the German publisher of academic journals Springer Nature AG & Co. gained on its first day of trading. Still, not all deals have succeeded, with Spanish bakery firm Europastry SA halting its offering last week.
CVC has raised about $1.2 billion in gross proceeds by selling shares in the IPO, according to Bloomberg calculations. The private equity fund bought Zabka in 2017 in a deal that valued the retailer at about €1 billion ($1.1 billion).
CVC still sees “ample room” for the retailer’s growth in Poland, Krzysztof Krawczyk, the head of fund’s Warsaw office and Zabka’s chairman, said in an interview with Bloomberg TV.
There are hopes that the Zabka deal may encourage further Polish listings. Warsaw bourse chief executive officer Tomasz Bardzilowski called the listing the “opening of a new chapter” for the exchange during the pre-trading ceremony.
Zabka hasn’t raised any fresh funds in the IPO. Along with CVC, Partners Group Holding AG and the European Bank for Reconstruction and Development are among the sellers.
Banks may sell additional shares in the coming weeks through an over-allotment option, which would increase the size of the deal up to 7.42 billion zloty, and the free float to 34.5% from the initially planned 30%. CVC will still keep more than 40% in the company, pledging not to sell another stake within the next 180 days.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. were global coordinators of the share sale.
--With assistance from Pablo Mayo Cerqueiro.
(Updates with market close.)
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