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Terra Firma resurrects IPO

The London-based private equity firm that last week shelved plans for a €1.1 billion initial public offering of its German residential property company, Deutsche Annington Immobilien, amid ‘adverse market conditions’, has announced it is coming back for a second tilt.

Terra Firma, the London-based private equity firm, has speedily resurrected plans for an initial public offering (IPO) of its German residential property company, Deutsche Annington Immobilien, this time at a reduced price and volume.

Deutsche Annington was due to be launched on the Frankfurt Stock Exchange last week with a target of raising €1.1 billion, but the plan was scrapped due to “adverse market conditions”.

However today the company performed a quick U-turn by saying it would float the company after all, albeit with more modest plans to raise €575 million to €592 million – much smaller than Terra Firma initially plotted.

“While the implementation of our operating strategy continues well on track, a successful IPO enables us to accelerate the diversification of our funding,” chief executive officer Rolf Buch said in the statement.

For this revamped offering Terra Firm is aiming to sell the shares between €16.50 and €17 apiece, down from a previous range of €18 to €21.

Reuters said Deutsche Annington had closed the books on its IPO, with only the lower end of the price range oversubscribed, according to two people familiar with the matter. The two sources told Reuters the books were oversubscribed by three times to four times at the lower end of that range but were not oversubscribed at the top end. “This indicates that the final price will likely be between 16.50 and 16.75 euros,” one of them said.

The plan to float followed the strengthening of the company’s financial position in July last year when it agreed a refinance package for €4.5 billion of outstanding CMBS debt. Debt in the company originally stood at €5.8 billion when first arranged in 2006. The CMBS arrangements were made in the wake of Deutsche Annington becoming Germany's largest housing company after taking over fellow German residential property company, Viterra, for €7 billion in 2004 giving the group some 228,000 units throughout Germany.

Terra Firma began building up Deutsche Annington into a powerhouse of a German residential property company when it acquired 64,000 residential properties in 2000 for €2.25 billion from the German Federal Railways. The properties were originally constructed as affordable housing for employees and officials of the former state railway.