Amundi’s head of Investor Relations Cyril Meilland has overseen the group’s initial public offering that took place in November.
Amundi’s chairman Yves Perrier rang the opening bell of Euronext Paris’ trading session on 12 November.
Over 166 million shares of Amundi’s capital were being traded for the first time. This proved a bright spot in a market that has seen the global volume of IPOs diminishing, particularly during the third quarter of 2015, and listings plans being either cancelled or postponed.
Amundi’s IPO is the largest listing the Paris stock exchange has seen in ten years. It involved 33,358,336 shares sold by Societe Generale, which totally sold down its stake in Amundi and 3,779,010 shares sold by Crédit Agricole as part of the exercise of an over-allotment option that allowed the firm to sell a maximum of 5,003,750 shares.
With a share price set at €45, the global offering’s value amounted to €1.67bn. Overall, 22.3% of Amundi’s capital was made available to investors (excluding further employee offering).
That IPO was enshrined in the shareholder pact between Crédit Agricole and Societe Generale, which was agreed at the creation of the asset manager in 2010.
Last July, the arrival of Cyril Meilland as head of Investor Relations sped up Amundi’s project, which he has overseen at every step of the way.
“Usually, the window for the launch of an IPO closes by end-November. To achieve this, we have met the various deadlines thanks to the team’s hard work,” Meilland says.
“Timing to launch Amundi’s IPO would have been even better last June when market conditions were more favourable, before the summer turbulence. We announced on 7 October an indicative price range which assessed a market cap going from €7bn to €8.8bn. We acknowledge the final price is in the lower part of the range but this reflects a more cautious market in a volatile environment,” he adds.
Amundi’s market capitalisation has been valued at €7.5bn. The environment remains favourable for the financial sector in which several equity managers spot opportunities.
But Amundi is not the only manager that apparently wants to benefit from the stock exchange spotlight. Dutch group ABN Amro was listed in Amsterdam two weeks after Amundi, after the Dutch government decided to sell its stake. And other managers may follow.
“The financial services industry is already well represented in the stock market. Adding one or two new stocks thanks to recent IPOs will not change the market much. However, Amundi offers an investment opportunity in a sub-segment, the continental European asset managers, which is under-represented compared to UK or US asset managers, and lacks large listed companies,” Meilland observes.
Regarding the initial share price, Meilland refers to common practice in France in terms of a new issuer pricing its stock in the lower part of the range (€42 to €52.5 for Amundi).
“The high end at €52.5 was to be reached only if the market had markedly improved between the disclosure of the pricing range and the final price. Pricing takes several things into account. A balanced price should be found for the stock in order to have a good quality book with investors investing assets for the long term instead of going for the quick buck.”
“Long term investors know that they are usually better allocated than short term ones, so they set lower limits to their orders. However, having a balanced price remains important because we need liquidity, and it is not good having all investors holding their stocks for a very long period,” he argues.
Institutions that are commercial partners of Amundi have heavily invested in the group’s stocks on a long term perspective.
The Agricultural Bank of China (ABC) with which Amundi established a joint venture in 2008, has purchased over 3.3 million shares from Crédit Agricole for €150m through an affiliate – Faithful Way Investment Limited. The Chinese institution now holds 2% of Amundi’s capital.
On the retail side, investors account for 1.4% of all shares sold, whereas the average rate in other recent IPOs has reached 2%. Meilland specifies
the group has not particularly targeted individual investors.
“It remains hard to promote stocks towards retail investors because many constraints exist, all the more so when the markets are jittery,” he says.
Meilland explains Amundi’s listing could strengthen the transformation of the group as a competitive and open third party asset manager. According to him, it will also boost the brand, as being listed remains an important showcase and Amundi will therefore save money from advertising.
Another advantage he stresses is that it will give Amundi more flexibility when proceeding to acquisitions. “Amundi can pay in stock,” he points out.
Besides, Meilland reinforces Amundi’s focus, which is to reach €1trn under management by the end of 2016, with a third achieved via acquisitions and two thirds through organic growth.
“We are currently very close to hit the €1trn AUM threshold with only 5% in acquisitions; the bulk of the growth has been organic. We shall follow this path. It is not because we are listed that we will rush our acquisitions campaign.”
Its IPO will require from Amundi an additional effort in terms of transparency. Meilland says this issue has already been tackled by the manager since it was indirectly listed via Credit Agricole stock.
Will that put pressure on Amundi’s quarterly results though? Being listed does not seem to have affected the manager’s earnings much – at least, not recently.
A study by US consultant Casey Quirk has shown that in 2014 publicly traded fund management firms worldwide delivered the highest median profit margin level in five years (33%) and median revenue growth of 13%.
The firm surveyed 62 listed managers representing about $14.3trn (€13.47trn) in AUM. A large gap was spotted in the median revenue growth between geographical areas.
Moreover, Casey Quirk found that while 76% of the listed managers surveyed in its analysis recorded net new inflows in 2014, only 11 have stood out as clear winners in gathering new inflows.
The consultant also found that listed alternative managers posted more net new flows than their counterparts for the fifth consecutive year in 2014.
Jeffrey Levi, partner at Casey Quirk, commented: “Business complexity is at an all-time high. Managers are being challenged by both buyers and shareholders in a lower growth environment. Buyers want highly tailored outcome oriented solutions, while shareholders want to see significant cash flow generation through more scalable offerings. Product development and delivering a distinctive client experience will be critical for success.”
“Being listed will not put pressure on Amundi’s results or change its strategy. However, it brings positive tension. We shall not see this listing through a short term stance. We will follow the strategy that has been implemented since Amundi’s launch. The firm’s listing will only allow us to go faster and be stronger,” Meilland concludes.
In its IPO’s document de base, Amundi set a target of €120bn net new inflows between 1 January 2016 and 31 December 2018. In detail, €45bn would come from retail investors, €30bn from joint ventures and €45bn from institutional clients.
By reaching this target and cost management objectives, Amundi could “be able to generate increases in earnings per share of 5% over the 2016-2018 period.”
Can Amundi be indexed on the CAC 40 over the coming months?
“We are far away from being picked up into the CAC 40 index,” Cyril Meilland answers.
“CAC 40 takes free float into account. During the summer, we were ranked 90th on Euronext Paris according to our possible capitalisation adjusted for free float. Being part of the CAC40 is not an objective but we can only wish to be better valued by the market in the future,” he adds.