Portugal preparing for first IPO in more than five years

Portugal is preparing for its first initial public offering (IPO) in more than five years as the nation recovers from 10 straight quarters of contraction that erased about 70 per cent in market value.

The government will sell 70 per cent of CTT-Correios de Portugal next month, the first IPO since EDP-Energias de Portugal spun off its renewable energy unit in June 2008.

The PSI-20 index has lost about €50 billion in market value since peaking in 2007 as index members dropped out and investors shunned a gauge composed of banks, utilities and construction companies stung by shrinking domestic demand.

Portugal is counting on the offering to reduce debt and narrow its budget deficit as the third most indebted member of the euro area seeks to meet EU targets. The country plans to exit a rescue package in June after it asked for an EU-led bailout almost three years ago as soaring bond yields forced it out of the borrowing market.

"This is a country which was especially hard-hit as a result of excess spending in the run-up to the financial crisis," said Teis Knuthsen, chief investment officer at Saxo Bank A/S's private banking unit in Hellerup, Denmark. "An IPO would definitely be a constructive thing to see for a market which has lagged."

The benchmark index of Portuguese stocks has risen 15 per cent this year through to Wednesday, less than all developed European gauges tracked by Bloomberg except Austria and the UK.

Spain’s IBEX 35 index has advanced 20 per cent in 2013, while Greek stocks have rallied 30 per cent. Ireland’s Iseq has gained 32 per cent, data compiled by Bloomberg show.

Portugal's state-holding company Parpublica is selling some 105 million shares in CTT at €4.10 to €5.52 apiece, according to a November 18th prospectus. Bidders have until Monday, and trading is expected to start on Thursday. Demand reached more than six times the amount on offer, Portugal officials said this week. – (Bloomberg)