UPDATE 5-Skin care company Galderma seeks $2.3 bln in Swiss IPO

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IPO could be one of the biggest in Europe this year

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Advisers see enterprise value around $17 bln - source

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Main owners to remain invested

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CEO hopes to complete IPO by Easter

(Adds source detail on valuation, market paragraphs 4, 13, 20)

By John Revill and Emma-Victoria Farr

ZURICH, March 6 (Reuters) - Skin care company Galderma plans to raise about $2.3 billion in a flotation on the Swiss stock exchange later this month, it said on Wednesday, in what could be one of the biggest initial public offerings (IPO) in Europe this year.

The Swiss company, originally set up as a joint venture between Nestle and L'Oreal, sells Cetaphil, a product for damaged and sensitive skin, as well as muscle relaxants, fillers and creams to treat medical problems for conditions like rosacea.

A listing would be the latest in Europe following German tank part maker Renk and Athens International Airport last month, and would come as several other companies - including German perfume retailer Douglas - work on potential deals.

Rising equity markets and the prospect of lower interest rates are helping to stoke investor interest in IPOs.

Chief Executive Flemming Ornskov declined to give a potential valuation for Galderma, but a source close to the matter said advisers are working towards an enterprise value - equity plus debt - of around $17 billion.

"A valuation in the region of $20 billion could be realistic," said Stephan Sola, a Swiss based-fund manager at Plutos Asset Management.

The IPO will consist mainly of new shares, with a smaller chunk of existing shares to be sold by Swedish private equity firm EQT, which owns Galderma alongside Singapore's GIC and the Abu Dhabi Investment Authority (ADIA).

Ornskov was not worried that economic uncertainties might disrupt the process.

"The outlook is very strong for 2024 and mid-term, and together with the owners, we feel this is a very good time to take the next natural step for a company that is already run as if it was a public company by actually going public," he told reporters.

"If I look back since 2019 until now, we've had a few ups and downs with COVID and others, and the company has continued to perform, outperform the market, gain market share."

From 2019 to 2023, Galderma increased its sales by an average of nearly 12% per year, faster than the 7% rate for the $87 billion skin care market globally.

WINDOW OF OPPORTUNITY

EQT will continue to be a major investor following the IPO, although the exact stake has yet to be decided, Ornskov said.

"Shareholders EQT, GIC and ADIA will stay invested in the business," he told Reuters in an interview. "EQT will retain a significant stake."

"Proceeds will be used to pay down debt, with mid-term guidance to bring leverage down below $2 billion," he added, hoping the IPO would be completed by Easter.

Organic growth would also be a priority for the company, which is working on two potential new blockbuster products.

Its existing line up also includes Restylane, Dysport, Azzalure, Alluzience and Sculptra cosmetic products, which are used to fill lines and wrinkles and add volume to lips.

The company's sales rose 8.5% last year, excluding currency effects, to $4.08 billion, its highest ever. Core operating profit increased 21% to $942 million.

"Investors like companies with a defensive business model and good margins, so I assume that Galderma will attract interest," Plutos' Sola said.

"But Galderma will not be a sure-fire success either," Sola added. "The environment is not easy; in view of the further development of key interest rates and the economy in Europe or China, many investors are still cautious."

With U.S. elections looming later this year, market volatility is likely to increase, so the window for transactions may become narrower as the year goes on, a banker close to the deal said. (Reporting by John Revill, Emma-Victoria Farr and Pablo Mayo Cerqueiro. Additional reporting by Oliver Hirt. Editing by Kirsten Donovan and Mark Potter)