Cantillon: Paul Coulson follows Denis O’Brien’s lead

Paul Coulson has followed the lead set by Denis O’Brien and cancelled a planned IPO on the US market. Like O’Brien, Coulson’s company is carrying heavy debts – in Ardagh’s case built up as part of an acquisition spree.

The planned float of its metal containers business, Oressa, had been due by the end of the year but has now been pulled, with Coulson blaming market conditions.

The IPO market has been tricky in recent months, though many deals have still got away. However, the majority have priced below the mid-point of their expected range and, in many cases, the initial return to investors has been poor, or in some cases non-existent. Tech flotations have had difficulties, with investors fearing a bubble in valuations.

Ardagh is a different type of business, generating cash flows of almost €1.5 billion during the last quarter and with Ebitda of €277 million. Net debt, however, remains over €4.9 billion and is costing around €80 million a quarter to service. There is plenty of cash flow to service this, though – like O’Brien – Coulson was hoping to lower debt ratios and free some more cash for expansion.

All the signs are that the amount raised in IPOs this year in the US will be well below the recent average of $50 billion a year (excluding last year’s Alibaba float) with less than $30 billion raised so far in 2015. Some have already been forced to swallow their pride and accept much lower valuations. Coulson obviously decided he was not prepared to do this.

On Monday he said leverage was not a key issue. But with Oressa having some $1.5 billion in debt, it would have been one factor playing on the mind of potential investors. Having pulled the idea of an IPO for the full group and then failed to sell Oressa to private equity, Coulson may just have to stick to the knitting for the moment and hope stockmarket conditions improve.