PwC predicts sell-offs in Portugal and Greece

Public sales could bolster IPO market following second-quarter slowdown

Portugal and Greece will be considering big plans to sell state-owned assets through IPOs, PwC predicted today.

The professional services firm says the countries, which are under acute pressure to cut their national debt, would have few other options.

‘They will be attractive at the right price,’ says Mark Hughes, a partner in PwC’s capital markets group.

Hughes concedes that disposals of state-owned assets could be politically unpopular, but adds that finance ministers and heads of government have limited options. ‘What’s the alternative?’ he asks. ‘Tax increases are politically very unattractive.’

PwC made its forecast on the day the European Central Bank increased its key interest rate by a quarter of a percentage point to 1.5 per cent.

As this increases the cost of borrowing money, Hughes points out that companies will reduce their debt funding and raise more finance by issuing equity.

The effect is not black and white, but it does make a difference, he adds: ‘Rate increases make equity more attractive – but it’s not binary.’

The prediction comes from PwC as the firm says tough market conditions pushed down the price and number of flotations during the second quarter of this year.

The drop in number is surprising because the second quarter is traditionally one of the busiest periods of the year in terms of volumes.

Despite the falls in price and number, however, the value of IPOs in Europe in the second quarter rose by 48 percent, compared with the corresponding period in 2010.

Investors hungry for growth fed by natural resources bought Glencore, the commodities trader, and Vallares, the oil and gas business.

Those two deals accounted for more than €8 bn ($11.4 bn) of the €13.4 bn raised in Europe during the second quarter, according to PwC’s survey of all new primary equity IPOs on Europe’s main stock markets.

That pattern – in which a handful of big transactions provided most of the value – was also found elsewhere. Of the 134 IPOs in the quarter, the five largest generated more than €9 bn of the total.

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