The completely wrong valuation by the consultants of the interest and capacity of the domestic market to absorb this initial public offering, the biggest in Romania’s history, which the seller accepted via minister Constantin Nita on behalf of the Department of Energy and Gabriel Dumitrascu, head of the privatization division of the Department, made the government cut the price before running it, from EUR600 million to EUR386 million raised for the 15% sold.
“When a consultant is paid by the Romanian government, it should maximize the profit of all the parties involved, including the issuer, to which it should suggest a higher price range more in tune with what the market is willing to pay. A consultant that does not maximize its client’s profit first of all can be regarded as a less reliable consultant,” Rusanu told ZF in an interview on Friday, several hours after Nita and Dumitrascu announced the ‘success of the Romgaz IPO’ and the final price.
“I would like to see the Romanian government turn to the most reliable consultants in the future, interested in maximizing the revenue of the issuer first of all and equally considering the interest shares like Romgaz could stir in the market. Underestimating the local market was wrong,” Rusanu added.
“When you have savings of EUR46 billion [in Romania], do you really believe a company like Romgaz will have trouble raising EUR600 million? This was the initial estimate of the government that was supposed to be raised. Yet I’ve noticed the issuer and consultant lowered this initially sought level because the offering price was far from the first estimate.”
Asked why they did not set a higher price range for the sale of the Romgaz shares, the officials of the Department of Energy said the price consultants suggested was even lower.
“Of course I would have liked to collect about half a billion euros, because Romgaz is a valuable company and has a future, but the consultant that devised the offer came up with an even lower price range. Before the voting of the price by the government, our team negotiated with the consultants until 7 a.m. to have it raised,” Constantin Nita, minister delegate for Energy told a news conference on Friday when announcing the Romgaz IPO result.
Demand from retail and institutional investors was seven times higher than the number of 57.8 million shares or 15% in Romgaz offered. The retail investors (20% of the shares offered) even saw demand for 17 times more than offered, as they were willing to spend 4.9 billion lei (EUR1.1 billion), enough to pay for all the shares made available.
Rusanu says the consultant and the arrangers even pressured the ASF to allocate more of the IPO to London (via GDRs), leaving less for the Bucharest Stock Exchange.
“The consultant and the arrangers acted in such a way that ASF could interpret as pressuring to have the cap of two thirds [of the IPO] for GDR for the secondary market removed,” he added. (The consultants actually wanted the entire IPO to go to London, not just two thirds i.e.)
Romgaz is considered the ‘crown jewel’, the biggest and most profitable company that is still state-owned. The sale price of the IPO (RON30/share) values the company at RON11.6 billion. Romgaz has half of Romania’s natural gas reserves.
The team that arranged the IPO (global coordinators, domestic lead managers and legal counsel, that is Goldman Sachs, Erste, Raiffeisen Capital&Investment, BCR, Clifford Chance) will collect EUR7.56 million.
Whereas Erste and Raiffeisen have significant investments in Romania, as they own the first and fifth leading banks on the market, Goldman Sachs is not a long-term investor, being only interested to sell the stakes privatized by the government. Fifteen years ago, it assisted the Romanian government in the sale of the majority stake in telecommunications provider Romtelecom to Greece’s OTE group. Goldman conducts its Romanian operations from its offices in Warsaw and London.
(English version by Loredana Fratila-Cristescu)