SUSE seeks IPO valuation of $6.9 billion

Just over half of proceeds would accrue to SUSE through the issue of new shares, enabling it to reduce its debts as a multiple of core earnings to 3.25 times

Enterprise software company SUSE sets the price range for its initial public offering (IPO) in Frankfurt at 29 to 34 euros ($34.80 to $40.80) per share on Wednesday, implying a market capitalisation of between 4.9 and 5.7 billion euros ($5.9-$6.9 billion).

SUSE, whose open-source software helps run applications on cloud servers, mainframe computers and devices at the edges of networks, said it was seeking to raise around 1 billion euros ($1.20 billion) from investors.

American CEO Melissa di Donato, a veteran of SAP hired by EQT to run SUSE two years ago, has set her sights on sustaining double-digit revenue growth by both investing in the business and through acquisitions.

The planned IPO will give us the financial and strategic flexibility to accelerate our growth, while continuing to power mission-critical IT applications and workloads that are vital to our customers’ digital transformation, she said in a statement.

Just over half of proceeds would accrue to SUSE through the issue of new shares, enabling it to reduce its debts as a multiple of core earnings to 3.25 times.

The remaining shares will be sold by Swedish private equity investor EQT, which acquired SUSE in 2018 for $2.5 billion and stands to at least double its money.

The IPO adds to a busy season in Frankfurt, following the $10 billion listing by German used-car trading platform AUTO1 and a $14 billion debut by Vodafone's infrastructure unit Vantage Towers.

Funds managed by Capital Research Global Investors and GIC Private Limited have agreed to purchase shares worth up to 360 million euros ($431.98 million) subject to conditions, SUSE said, meaning that over a third of the IPO is covered by 'cornerstone' investors.

The base offer amounts to 31.9 million new and existing shares. That could increase at the lower end of the price range to 41.1 million shares, assuming that upsize and over-allotment options are exercised, giving a free float of up to 26.5%.

Bookbuilding for the transaction will begin on Thursday and run to May 17, with the first day of trading on the Frankfurt Stock Exchange, under the SUSE ticker, expected on May 19.

BofA Securities and Morgan Stanley are acting as Joint Global Coordinators and Joint Bookrunners, with Deutsche Bank, Goldman Sachs, Jefferies and J.P. Morgan supporting the transaction as Joint Bookrunners.