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Gyms and restaurants aim to tap investors as lockdown eases

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A growing number of gym operators and restaurant chains are moving to tap investors, as a sharp rebound in demand offers a leisure sector decimated by the coronavirus pandemic a rare window to raise money.

PureGym, the UK cut-price gym chain, has enjoyed a surge in demand, with visits now outstripping those of December 2019, shortly before the pandemic erupted, and membership volumes recovering.

As a result, the group, which is owned by private equity group Leonard Green & Partners, said last week that it was “considering its strategic options, potentially including an IPO”.

In the US, the Mark Wahlberg-backed fitness group F45 Training listed on Wall Street last week with a $1.4bn valuation. At the same time, SmartFit, the largest Latin American gym brand, raised about $450m in Brazil’s fifth-largest stock market listing this year.

Investors’ enthusiasm for a hospitality sector hit hard by lockdowns across the world comes despite the spread of the Delta coronavirus in the UK, in parts of the US and Europe and elsewhere.

In the UK, restaurant chains are seeking to take advantage of the easing of restrictions, which has led to a jump in demand for face-to-face meetings. The government lifted almost all remaining restrictions on Monday.

Tortilla, the UK casual dining chain backed by private equity group Quilvest, said it planned to list later this year to capitalise on “opportunities for new openings and further expansion in the new hospitality landscape”.

Epicurean Endeavours, a leisure-focused buyout firm backed by the former Sainsbury’s boss Justin King, is looking to raise between £12m and £15m in September. Meanwhile, Nightcap, a fund founded by Tonkotsu chair and former PizzaExpress manager Sarah Willingham that first floated in January, raised another £10m in May as it aims to snap up late-night bars.

“It’s the world’s simplest business plan,” said Andrew Fishwick, Epicurean Endeavours’ founder. “We don’t believe the desire for hospitality has gone anywhere apart from up and the market has never been in a worse situation. The opportunities are more incredible than they have ever been.”

Britain’s hospitality sector has lost about £80bn in sales during the pandemic, according to trade body UKHospitality, with 10,000 businesses closing.

The industry is now grappling with higher food costs due to tight supply chains and rising wages. Pub and restaurant operators also face severe staffing shortages after thousands of employees sought out other careers during the lockdowns.

Fishwick insisted that investors were not deterred by fears that a fourth wave of infections in the autumn could see restrictions reimposed. “If anything we are seeing people becoming more bullish. I think people are becoming pretty sure that while we will have waves and variants we are going to have to live with this thing.”

However, Hugh Osmond, the leisure entrepreneur and founder of Punch Taverns, warned that investors should be careful which businesses they back.

“Investors seem to be not selective and that is going to turn out to be a mistake . . . What you don’t want to back is a business whose brands and venues were a bit tired going in [to the pandemic] but have been temporarily boosted by the post-Covid surge”.



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Abu Dhabi’s Adnoc plans 7.5% stake float of oil drilling unit

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Abu Dhabi National Oil Co updates

The Abu Dhabi National Oil Company plans to list a 7.5 per cent stake in its drilling unit via an initial public offering on the Gulf emirate’s stock exchange next month.

Adnoc Drilling is 95 per cent owned by Adnoc, which has in recent years embarked on a modernisation drive including diversifying its investor base and unlocking cash from its infrastructure base.

In 2018, when Baker Hughes acquired a 5 per cent stake in the business, Adnoc Drilling had an equity value of $10bn.

“Adnoc Drilling’s planned value creation opportunities, including a major rig fleet expansion and well drilling program, ideally position the company to take full advantage of emerging opportunities,” said Sultan Al Jaber, Adnoc’s chief executive.

The offering, which is open to domestic and international investors, is expected to take place in October on the Abu Dhabi Securities Exchange (ADX) subject to market conditions and regulatory approvals. The size of the offering could be increased.

The United Arab Emirates, which is already the third-largest producer in Opec, is committed to raising its output capacity from 4m barrels a day to 5m barrels a day.

The Gulf state earlier this year clashed with its larger neighbour, Opec kingpin Saudi Arabia, by refusing to endorse a planned Opec+ production increase. Abu Dhabi argued that its “baseline”, the level from which Opec quotas are calculated, should be increased. A compromise deal was clinched in July that raised the UAE’s baseline quota from 3.2m barrels a day to 3.5m barrels a day.

Adnoc Drilling, the largest drilling company in the Middle East by fleet size, is the sole provider of drilling services to Adnoc. In 2020, Adnoc Drilling’s revenues were $2.1bn, with a profit of $569m.

The deal would be the second IPO launched by Adnoc since the 2017 listing of its distribution arm, the largest operator of petrol stations and convenience stores in the UAE.

The national oil company has separately opened its refineries and oil and gas pipelines businesses to international investors. It is also seeking to sell stakes in its power plants and other infrastructure.

Adnoc earlier this year started trading futures of its flagship crude oil, Murban, on ICE Futures Abu Dhabi, a commodities exchange based in the capital’s financial district.

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Chemicals distributor Azelis seeks to raise €880m in Brussels IPO

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IPOs updates

Speciality chemicals distributor Azelis is seeking to raise €880m in an initial public offering in Brussels in what will be one of the sector’s largest listings this year.

The Antwerp-based company, which is owned by Swedish buyout firm EQT, is targeting a valuation of more than €5bn, according to people familiar with the matter.

The IPO would make Azelis the world’s fourth-largest listed chemicals distributor in a highly fragmented €117bn market. As well as using the IPO’s proceeds to cut some of its €1.6bn of debt, the company also plans to make further acquisitions.

“As a public company, we believe we will be able to fully capitalise on growth opportunities, continuing to complement our strong organic growth with accretive acquisitions,” said chief executive Hans Joachim Müller.

Müller said he hoped to expand operations in Asia and gain a foothold in Latin America, where Azelis does not have a presence.

Founded in 2001 from the merger of French and Italian distributors, Azelis’s business extends beyond distribution. It also has a network of laboratories that test products and add new ingredients to existing products for clients.

The company expects tougher regulations in markets from animal nutrition to cosmetics to push more chemical producers to outsource distribution and formulation services to larger external providers.

Azelis laboratory
In addition to distribution, Azelis also has laboratories that test products and add new ingredients to existing products for clients © Ben Connell

Azelis generated revenues of €2.2bn last year, while its operating profit climbed 10 per cent from 2019. It employs 2,800 people across 56 countries.

Demand for chemicals has rebounded rapidly from the pandemic’s initial hit, sending valuations for the sector soaring and handing EQT a chance to capitalise.

Nouryon, the former chemicals arm of Akzo Nobel that was acquired by US buyout firm Carlyle in 2018 in a €10bn deal, is also set to go public.

Although Azelis has only a 2 per cent market share, it is enough to make it one of the sector’s largest players alongside Germany’s Brenntag, IMCD from the Netherlands and Illinois-based Univar Solutions. In a sign of investor appetite for the sector, Brenntag’s share price is at an all-time high.

Müller said that because the company’s global service centre was in Belgium, Brussels was the best place to list. It would be the largest IPO on the Brussels Stock Exchange since 2007.

EQT will retain a stake in the company following the IPO, which Azelis had considered before the Swedish private equity firm led a buyout of the business in 2018.



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Petershill/Goldman Sachs: private capital seeks paradoxical public market boost

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Goldman Sachs Group updates

Groucho Marx was suspicious of any “exclusive” club whose standards were so low he could join it. The UK’s dyspeptic long funds may have similar reservations about Petershill Partners. This offshoot of Goldman Sachs buys stakes in private equity groups and hedge fund managers. The investment bank plans to float Petershill, which may be worth about $5bn, in London. Anyone with a broking account will be able to buy shares previously only available to select Goldman clients.

The Wall Street bank will remain a gatekeeper in another respect by investing the capital of Petershill Partners in return for fees. These look generous, even though a minimum 7.5 per cent annual charge would be levied on income from investee companies, rather than on fund value.

Goldman, which is diversifying into asset management, will have earned its money if it uses its powerful network to make lucrative investments.

If you think that will happen, Petershill will be a worthwhile investment itself. If not, shrug and pass on. A stock market is a place to test business propositions. It is not a corporate Hall of Fame, though that is how London sometimes self-defeatingly seems to see itself.

Petershill invests in asset managers rather than their products. This spares end investors two tiers of management fees. Typically, it purchases minority stakes in private capital managers when they issue equity to finance expansion.

Private capital is hot at the moment. You might therefore ask why Petershill is seeking a mooted $750m from unfashionable public investors rather than that source.

The reason is that alternative asset managers from Apollo to Pershing Square prize permanent capital, which they can deploy for the long term. The stock market is a good supplier. You might also see adroit timing in Petershill’s plan to float when private capital management is, in the words of one buyout boss: “The hottest of hot spaces at the peakiest of market peaks”.

However, the mooted price of about $5bn would equate to only around 22 times estimated net income in the 12 months to June. That is a lot lower than US peer Blue Owl and quoted UK buyout group Bridgepoint, which are trading at more than 30 times forward earnings.

Routinely presented as polarities, private and public market capital remain inextricably entwined, as this deal would prove.

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