The IPO Process of Prysmian

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THE IPO PROCESS:

THE PRYSMIAN CASE
The Company
Prysmian is the former division of cables and optical

fibers owned by both Pirelli Group and Telecom
(previously known as Pirelli Cables).
The first strategic option that the management tried to
implement was a sale of the firm in the M&A market,
with no success.
The private equity division of Goldman Sachs, instead,
valuing the deal as attractive, bought the company at
the end of 2004 and changed its name to Prysmian
2
WHY the IPO OF PRYSMIAN?
In 2007 Goldman Sachs started to implement an exit

strategy from the investment via an IPO of the
company.
Goldman Sachs offered the public around 72mln of
shares, representing about 40% of the total capital
of the company.
The offer was presented to investors as a unique
platform to capture end-markets growth through
excellence of execution, best-in-class operating
leverage and cash generation.
3
WHY the IPO OF PRYSMIAN?
Among the key takeaways of the equity story:

Prysmian was a leader in its reference markets, had
attractive fundamentals with continued growth, a
high level of diversification (in terms of products,
clients and geographies) and resilience, high barriers
to entry in high value-added segments, a significant
R&D effort to develop hi-tech products and
advanced production processes, industrial efficiency,
product flexibility & operating leverage and a solid
management track record.
4
THE IPO PROCESS OF PRYSMIAN

MAIN PHASES
Preparation Pre-Launch Execution

(~4-6 months (~3-4 months (1-2 months
prior to IPO launch) prior to IPO) prior to IPO)
 Advisors  Due diligence  Marketing

 Transaction  Legal  Price
management documentation determination
 Key issues to  Legal process  Investor
be addressed relations
 Offering
 Valuation structure
methodologies
5
TIMETABLE OF PRYSMIAN IPO

SPEED OF EXECUTION
Financial information preparation
6
Prospectus/Offering circular drafting Drafting/Respond to comments
Documen-
tation and
QMAT and Business Plan preparation Underwriting Agreement
Due
Diligence
Sponsorship and related documentation
Bring down
Due diligence Due diligence update
due
diligence
Equity Story definition/Valuation updates
Marketing
and Pre-marketing
Valuation
Roadshow presentation
Roadshow/OPV
preparation
Meeting with Borsa/Consob

Key  Strategic review
Complete
Events  Advisor selection Kick off Shareholder meeting Filing Prospectus publication Pricing
 Committee creation meeting
 Internal preparation
Filing Borsa/Consob Price range finalised Closing
Oct/Dec 2006 Jan/Mar 2007 Mar/Apr 2007 Apr/May 2007
Preparation Pre-launch Execution
6
THE SYNDICATE OF PRYSMIAN
Joint Global Coordinators
Goldman
Sachs + JPMorgan + Mediobanca
Global Institutional Offering (80% of Underwriting) Italian Retail Offering (20% of Underwriting)
Joint Bookrunners “Responsabile del Collocamento”
Goldman
Mediobanca Mediobanca
Sachs
Co-Lead Managers “Collocatori e Garanti”
ABN Banca Banca BNP Pool of 21 Banks (and Subsidiaries)

AMRO Aletti Caboto Paribas + further 4 banks “Collocatori non garanti”
7
EXECUTION OF PRYSMIAN IPO
Setting the Marketing and

Equity Pre-Marketing Pricing
Price Range Book-building
Story
26-Mar-2007 16-Apr-2007
- 13-Apr-2007 - 27-Apr-2007
13-Apr-2007 27-Apr-2007
8
PRE-MARKETING
 Exstensive Pre-Marketing Activity

Results of the extensive pre-marketing activity
showed that investors, while expressing concerns on
the cyclicality of the cable business and on the
future sustainability of margins and R&D expense
level, highly regarded the good business
diversification and exposure, the attractive sector
trends, the high level of profitability (in terms of
margins and ROIC), the top line and earnings growth
and the high management credibility.
9
PRE-MARKETING
Pre-Marketing (26-Mar – 13-Apr-2007)

 7 Analysts  11 Countries Visited  187 Accounts Covered
UK Germany
Institutions 67 Institutions 9
France Italy
Institutions 22 Institutions 30
Other Countries
Institutions 59
Roadshows (16-Apr – 27-Apr-2007)

 7 Countries Visited >270 Investors Met
No. of No. of Rotterdam/ No. of
Boston Investors London Investors Amsterdam Investors
One-on-ones 25 One-on-ones 8
One-on-ones 7 Group Meeting 3
No. of Frankfurt/ No. of

New York Investors Zurich Investors
Group Meeting 2 Group Meeting 1
No. of No. of
Paris Investors Milan Investors
Group Meeting 1 Group Meeting 2
10
PRE-MARKETING
HOW DID INVESTOR PERCEIVE THE STORY?
Positives Concerns
 Good business diversification and  Cable business is highly cyclical

exposure, supported by client and and some believe that the sector is
regional diversification currently trading at its peak
 Investors appreciate the positioning  Restructuring benefits already
towards higher margin segments within materialised vs. peers with limited
the various end markets exposure to further operational
improvements
 Attractive sector trends for both the
energy and the telco. Businesses. The  Concerns on future sustainability of
investment in the transmission and margins achieved post
distribution infrastructure is seen as restructuring
particularly attractive  Concerns on the future
 High level of profitability in terms of sustainability of current R&D
margins and ROIC expense level and on possible
future increase in Capex
 High management credibility following the
implementation of a sustainable recovery  Focus on IPO valuation as future
over the last 3 years upside is seen as uncertain despite
growth potential
 Top line and earnings growth as one of
the drivers of the Prysmian equity story  Some investors where
disappointed that management is
 Positive environment overall for an IPO of selling at IPO
Prysmian
 Concerns on an opportunistic exit
by PE
11
SETTING THE PRICE RANGE
12
Market
Conditions
Company
DCF Valuation
Objectives
Comparable Investor
Price Range
Companies Feedback
Prysmian Price Range

Bottom
Price €13.25
€16.75
EV/EBITDA 2008E 6.7x

12
8.0x
SETTING THE PRICE RANGE
 Example of IPO valuation, Prysmian IPO
13
MARKETING AND BOOK-BUILDING

 During road-shows the underwriters
start collecting indications from
investors in terms of price and quantity
of the offer that they would like to buy,
i.e. they “open the books” and start
collecting orders
 Institutional investors can place orders
in variable sizes and prices depending
on their interest
14

 Sector investors and mid-cap
specialists are typically the first to put
orders into the book, assuming the role
of key opinion makers that drive
demand.
 As momentum builds up, the
remaining investor constituencies
come in the book and a press coverage
increase attracts retail demand.
15
1,580
1,520
1,400
1,000
Deal
Size
600
510
400
500
250
100
50
0
Day 1 Day2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8 Day 9 Day 10
16
PRICING
The moment of the Pricing in which the final offer
price is set is crucial to the success of the offering, as
just one number has to come out of the already-
existing range
Ideal pricing is at a reasonable discount to the
trading value of the company’s peers. The book of
demand is the most important tool in pricing
discussions, as limits from anchor orders and from
investors that have been heavily involved in the
process are key
At the end, pricing should achieve the company’s
valuation objectives whilst ensuring a stable
aftermarket 17
PRICING
Usually, pricing an offer at the bottom of the range
leaves the issuer unhappy, because the significant
discount implies that a great amount of money is not
collected by the company, instead it is “left on the
table” for shareholders that can benefit from strong
price increases in the aftermarket
On the other hand, an offer priced at the top of the

range may constitute too aggressive a bet for of
institutional investors
18
PRICING
 The book of demand for the IPO of

Prysmian
19
PRICING
The final price for the offer, starting

from an initial range of €13.25 and
€16.75, was set at €15.00, which
attributed the company an implied
market capitalization of €2.7bn.
PRIVATE AND CONFIDENTIAL. This document is being sent to you for your information only as a student of Bocconi
University attending a class and should not be forwarded to anyone for any reasons. This document does not constitute
an offer to sell the securities or loans of the companies named herein or a solicitation of proxies or votes and should not
be construed as consisting of investment advice.
20

The IPO Process of Prysmian

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The IPO Process of Prysmian

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Do not copy- do not post online-do not distribute

THE IPO PROCESS:

Prysmian is the former division of cables and optical

WHY the IPO OF PRYSMIAN?

In 2007 Goldman Sachs started to implement an exit

WHY the IPO OF PRYSMIAN?

Among the key takeaways of the equity story:

THE IPO PROCESS OF PRYSMIAN

Preparation Pre-Launch Execution

 Advisors  Due diligence  Marketing

TIMETABLE OF PRYSMIAN IPO

Meeting with Borsa/Consob

Oct/Dec 2006 Jan/Mar 2007 Mar/Apr 2007 Apr/May 2007

Preparation Pre-launch Execution

THE SYNDICATE OF PRYSMIAN

Joint Global Coordinators

Joint Bookrunners “Responsabile del Collocamento”

Co-Lead Managers “Collocatori e Garanti”

ABN Banca Banca BNP Pool of 21 Banks (and Subsidiaries)

EXECUTION OF PRYSMIAN IPO

Setting the Marketing and

 Exstensive Pre-Marketing Activity

Pre-Marketing (26-Mar – 13-Apr-2007)

Roadshows (16-Apr – 27-Apr-2007)

No. of Frankfurt/ No. of

 Good business diversification and  Cable business is highly cyclical

SETTING THE PRICE RANGE

Prysmian Price Range

EV/EBITDA 2008E 6.7x

SETTING THE PRICE RANGE

 Example of IPO valuation, Prysmian IPO

MARKETING AND BOOK-BUILDING

MARKETING AND BOOK-BUILDING

MARKETING AND BOOK-BUILDING

On the other hand, an offer priced at the top of the

 The book of demand for the IPO of

The final price for the offer, starting

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