By Elisabeth O'Leary and Simon Jessop
MADRID/LONDON (Reuters) - Shares in Spanish airports group Aena (MC:AENA) surged 16 percent on their stock market debut, powered by strong demand for a company with relatively few rivals as Spain's economic recovery gathers pace.
The success of the 3.88 billion euro (3 billion pound) sale, Europe's largest initial public offering (IPO) since Glencore (L:GLEN) raised 7.1 billion euros in 2011, shows faith in Spain's economic pick-up. Investors also said it was underpinned by a benign market in which bond yields have been falling.
The opening price of 65.1 euros per share, against an offer price of 58 euros, valued Aena at 9.77 billion euros after state-controlled Spanish holding company Enaire sold 44.6 percent of the company.
That compares with valuations of 10.5 billion euros and 5 billion euros respectively for France's ADP (PA:ADP) and Germany's Fraport (DE:FRAG), Aena's biggest two European counterparts. Valuations in terms of IPO price to projected earnings gave Aena a steep discount to rivals, analysts said.
Aena has based its pitch on an attractive growth profile after a complete restructuring, and a bright outlook helped by a surge in tourism in the world's third-most visited country.
"There just aren't enough assets of this character for the money that's chasing it," said one London-based fund manager who has put in for an unspecified slice of the company. "Most of the capex has been done already, so it is essentially a cash cow."
He expressed concerns, however, that investors such as infrastructure operator Ferrovial (MC:FER) and financial holding Alba (MC:ALB) had been priced out after the IPO was more expensive than they were prepared to pay.
"It doesn't mean that it's not a good investment, but I don't have the same amount of safeguards on the board as I had a week ago," he added.
GREAT EXPECTATIONS
Only one core investor, Britain's TCI, has been confirmed although full ownership details will be known only next week.
Aena, which runs 46 Spanish airports and has stakes in London's Luton airport as well as airports in Mexico and Colombia, says it handles 187 million passengers a year.
Chairman Jose Manuel Vargas brushed off suggestions that the shares could have been sold for a higher price.
"Expectations for the company are enormous, and it shows that investors are placing a premium on the company above the alternatives they have in the market," he told reporters.
Underpinning the share rise are expectations that the group will shortly be included in the Ibex-35 (IBEX) most-traded stocks, bankers said.
The group will pay out half of expected profit in dividends from 2015, equivalent to 299 million euros that year and roughly in line with peers such as Germany's Fraport (DE:FRA).