UPDATE 2-Enel gives unit IPO retail focus as funds balk

* Retail investors allocated 78 pct of IPO

* Hedge fund share of institutional offer marginalized

* EGP likely to enter blue-chip index
(Recasts, adds analyst, source comments)

By Stephen Jewkes

MILAN, Nov 2 (BestGrowthStock) – Enel (ENEI.MI: ) decided to reweight
the initial public offering of its renewable energy unit Enel
Green Power towards retail investors after institutionals
balked at the price, providing protection when the stock debuts
on Thursday in what is Europe’s biggest listing in three

On Tuesday Enel said almost 78 percent of the shares in the
IPO, including an overallotment option, have been allocated to
retail buyers. In its IPO prospectus, Enel had earmarked “at
least” 15 percent for retail.

In an effort to lure institutional investors clamoring for
a discount, Enel cut the price range from a preliminary 1.9-2.4
euros to 1.8-2.1 euros per share. It then said it would take
offers from 1.6 euros per share, which was set as final price.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ FACTBOX on the IPO [ID:nLDE69A1OP] FACTBOX on top IPOs [ID:nLDE69D1L9] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

“The size of the retail offer will limit the capacity of
hedge funds to short the stock since a requirement for getting
the bonus share is that stock cannot be lent out for shorting
purposes,” a London fund manager said on Tuesday.

Under the IPO, retail investors who keep their shares for
12 months will get one bonus share for every 20 shares owned.

A banking source said that should a greenshoe option of 210
million shares, destined for institutional investors, not be
exercised by the banking consortium, those shares would be
returned to Enel. In such a case the retail share would rise to
around 89 percent of the offer.

“The stock should hold up well because they’ve managed to
weed out the hedge funds, and the ones that are there have been
scaled back by the company,” a Milan-based fund manager said.

A source close to the matter told Reuters that Enel and the
consortium had carefully vetted institutional investors to
marginalize hedge funds and privilege long-term investors.

According to a note from Credit Suisse (CSGN.VX: ), joint
global coordinator in the IPO and joint bookrunner, some 23
percent of the original institutional demand had been from
hedge funds.

The Milan fund manager noted that with a market
capitalization of 8 billion euros, it was likely EGP would
enter the blue-chip index at the year-end reshuffle, attracting
index-tracking funds.


Enel, Europe’s most-indebted utility, had hoped to raise at
least 3 billion euros from the sale of up to 32.5 percent of
EGP. But at 1.6 euros per share it would raise from 2.228
billion euros, net of banking fees, up to around 2.6 billion

“To make it a success we had in mind a price of 1.45 euros
per share to provide a discount to peers, given that it’s a new
name and has a lower growth rate than peers,” a London fund
manager said, acknowledging, however, that it has a more
diversified mix and a broader geographical footprint.

But he added that Enel’s falling short of the planned 3
billion euro cash-in was not a problem since it could find
other ways to reach the year-end debt target of 45 billion

“Anyway, it’s not meaningful for the rating agencies since
the liquidity situation is under control,” he added.

CEO Fulvio Conti, the man behind the internationalization
of Enel, which controls 92 percent of Spain’s Endesa (ELE.MC: ),
is committed to cutting group debt from June’s 53.9 billion
euros to protect its credit rating.
(Reporting by Stephen Jewkes, editing by Gerald E. McCormick)

UPDATE 2-Enel gives unit IPO retail focus as funds balk