IPO WATCH: Evonik, Georgian Railway Show Twin-Track Europe

Evonik Industries AG's decision to press ahead with a Frankfurt listing as Georgian Railway pulls a planned London float highlights Europe's increasingly divided equity capital markets landscape, with the relative strength of German companies and the benchmark DAX index at odds with volatility and gloom elsewhere in Europe.

Specialty chemicals maker Evonik said Friday that it would launch what could be Germany's biggest IPO since 2000, raising up to EUR4.5 billion. By contrast, Georgian Railway, the state rail monopoly for the former Soviet state, Thursday said it had postponed a London listing of global depositary receipts set to raise up to $250 million.

"This relates to Germany as an economy and a destination for investor sentiment," said Martin Steinbach, IPO leader at Ernst & Young for Europe, the Middle East, India and Africa. "Investors are showing their confidence in the underlying economy."

The twin moves highlight that German companies preparing to list in Germany are likely to have an easier reception than companies listing anywhere else in Europe in the short term, boding positively for H.C. Starck, another chemicals group, insurance group Talanx AG and Siemens AG's (SI) lighting unit, Osram, all of which are evaluating IPOs this year.

H.C. Starck, which reactivated its IPO process last month after earlier putting a float on hold, is owned by private equity firms Advent International and Carlyle Group LP. Talanx, Germany's third-largest insurance group, said in March conditions were positive for an IPO but added that the group might call off its plans if markets deteriorate. Talanx most recently said an IPO was being evaluated. Siemens said this week it looking at an IPO for its Osram lighting unit in the third quarter.

London dominates equity capital markets activity in Europe and will likely continue to do so, industry watchers say, cautioning against any assumption that there's a long-term trend away from the British capital's dominance. But in the short term, relative confidence in the German economy and outperformance of its blue chip DAX index could make Germany a more appealing destination for large cap-stock issuance while other European markets--including recession-hit London--are being battered by continuing uncertainty over Greece and the threat of wider contagion.

"If there's an IPO market that's open in Europe at the moment, it's Germany," one equity capital markets professional told Dow Jones Newswires on Friday.

Europe's IPO market has battled volatility and see-sawing confidence since the financial crisis of 2008 and 2009, with brief periods of optimism among issuers interspersed with longer periods of gloom.

The IPO market saw a brief period of optimism this year, following a period of very limited capital markets activity through the second half of 2011.

Netherlands cable firm Ziggo NV (ZIGGO.AE); Swiss business services group DKSH Holding Ltd. (DKSH.EB); and Ruspetro PLC (RPO.LN), a Russia-focused oil exploration firm, listed successfully in Amsterdam, Zurich and London, respectively, and all are trading above their list price.

But market observers say the confidence that brought these companies to list stock has since waned against a drumbeat of bad news from the more troubled parts of Europe and that window has since closed again in most European markets.

But Germany's benchmark index has risen 8% year to date, compared with a 4% drop for the U.K.'s benchmark FTSE 100 and France's CAC 40, down 1.6%. Broadly speaking, this reflects the relative health of those economies, with Germany showing growth compared with a flatlining French economy and recession in the U.K.

London has appeared to suffer more than other potential IPO destinations. In addition to Georgian Railway, two companies, bid vehicle Tungsten and Russian real estate group 01 Properties, have also pulled or delayed planned London listings in the past month.

Equity markets professionals are sanguine about the impact of the current turbulence on London.

"London is very much open for the right companies," Craig Coben, head of European equity capital markets at Bank of America Merrill Lynch, told Dow Jones Newswires. He notes that London remains the preferred destination for emerging market companies looking to list. The U.K. is still Europe's biggest market for stock issuance by far. U.K. IPOs have generated $618 million this year so far, compared with just $7 million for Germany, according to figures from Dealogic.

But Coben concedes that companies listing in what he calls "creditor countries" have materially outperformed those listing in countries with deficits.

- By Jessica Hodgson; Dow Jones Newswires; [phone]; [e-mail].

(Friedrich Geiger in Frankrfurt and Marietta Cauchi contributed to this article.)