Another flop as 85% of MFI shares are left with underwriters

THE pounds 158m public offer of shares in MFI Furniture Group has flopped. It was announced yesterday that 85 per cent of the shares on offer to the public had be left with City underwriters.

This is despite the shares being priced at just 115p, well below the 130p to 145p initially indicated when the flotation was first announced last month.

County NatWest, the merchant bankers to the issue, said that 44 per cent of the public offer had been taken up but then revealed that 29 per cent of the shares had been subscribed for by institutional investors that had also agreed to take the shares as sub-underwriters in offset arrangements. This meant that investors attracted during the marketing of the issue only bought 15 per cent of the shares on offer.

Analysts are expecting the shares to open well down on the offer price when trading starts on Friday. Estimates in the market are for a price between 100p and 105p, though this could be even lower if the Bundesbank raises German interest rates on Thursday.

The failure of the MFI issue follows the unsuccessful flotations of The Telegraph, publisher of the Daily and Sunday Telegraph, where only 23 per cent of the issue was taken up, Anglian Group, in which 95 per cent of the shares ended with the underwriters, and the European Companies Investment Trust, where investors subsribed for pounds 35.5m shares, only pounds 500,000 more than the minimum feared by its backers, Dresdner Bank.

Dealings in Anglian start on Wednesday and some dealers expect the price to fall to 180p compared with an issue price of 210p. But advisers to the issue say they are optimistic that few of the sub-underwriters will want to offload their shares.

The failure of the MFI float also puts a cloud over two issues due to come up in the next fortnight. Subscriptions for the pounds 78.5m flotation of Taunton Cider, which close on Wednesday morning, are not expected to be high and there are worries about the pounds 3bn offer of shares in Wellcome, the pharmaceutical group, by the Wellcome Trust.

Unlike the other offers, Wellcome's is not underwritten. Investors will instead be invited to tender at their chosen price - and its advisers stressed again yesterday that the final decision on how many shares are sold will depend on the price.

Confidence in the issue has been boosted by the recent strength of Wellcome's share price, recovering some of the sharp falls suffered just after the offer was announced. The group was making presentations to investors in Seattle and Los Angeles yesterday as part of an international programme which began two weeks ago.

The 'book', recording preliminary offers, formally opened in Japan yesterday although it has been running for a week in the rest of the world.

Rumours of a take-up of less than 20 per cent for Taunton were dismissed by its advisers, who said that no one would know the final figure until the offer closed on Wednesday.

----------------------------------------------------------------- NEW ISSUE APPLICATIONS ----------------------------------------------------------------- Company %* Anglian. . . . . . . . . . . . . . . .5 Kenwood. . . . . . . . . . . . . . .120 MFI Furniture. . . . . . . . . . . . 15 Telegraph. . . . . . . . . . . . . . 25 ----------------------------------------------------------------- * Of shares on offer to public -----------------------------------------------------------------

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