Halifax investors in line for pounds 1,700 windfall on pounds 13bn floa t

The windfall from the flotation of Halifax Building Society could be worth an average of more than pounds 1,700 for its 7.6 million members, it emerged yesterday. And according to analysts, Halifax could be valued at almost pounds 13bn when trading in the shares begins in early June.

The society said yesterday it would issue 2.51 billion shares, and it would have paid a dividend of 13.6p net out of earnings of 34.1p for the 11 months to the end of December if it had been a quoted company. If the shares are valued on the same pro forma price earnings and gross dividend ratios as the A&L, which floated last week, this would suggest a market price of 506p a share.

That in turn would value the minimum entitlement of 200 free shares at more than pounds 1,000 and the average holding at pounds 1,736. Eligible Halifax borrowers are entitled to 200 shares, investors with between pounds 100 and pounds 1,000 on their account will receive 200 shares, plus one extra share for every pounds 50 held on the lower of the balances held on the two qualifying dates in November 1995 and February 1997.

The Society also yesterday set a minimum price of 415p for the free shares it will auction on 30 May on behalf of any of its 7.6 million members who want their windfall in cash rather than shares. If offers from institutions fail to reach the minimum they will not be sold without a fresh instruction from members.

Gary Marsh, head of corporate affairs at Halifax, said: "We have set the minimum to reassure investors so that they know that we will not sell below this amount.

"In this way they do not have to worry about the possible adverse impact of the election and any subsequent rise in interest rates on the value of their windfall."

Andrew Faulds and Mike Blackburn, Halifax chairman and chief executive respectively, will be touring City institutions to persuade them to bid higher than the 415p minimum.

City sources suggested that the minimum price of 415p a share will be comfortably exceeded at flotation on Monday 2 June, giving far bigger cash payouts to those who want to sell on that day.

The Halifax transfer document last December estimated the likely share value to be between 390p and 450p, since when shares in the banking sector have risen by an average of 18 per cent.

Matthew Ponsonby, senior associate director at Deutsche Morgan Grenfell, which is helping to oversee the bookbuilding exercise, said he hoped the share price at flotation would be higher than the published floor, although he refused to speculate by how much.

Mr Marsh added that Halifax had considered a similar approach to Alliance & Leicester. A&L, which floated last week, said that it would halt the sale of its shares if stock markets plunged by 20 per cent or more.

Members who want to sell must complete and send back a form to Halifax if they want the society to sell their shares free of charge to institutional investors on 30 May, prior to the start of normal trading on the Monday.

Halifax executives are now hoping for an orderly run of sell orders rather than a potential last-minute rush close to the 26 May deadline, which executives admitted might overwhelm the administration.

If for any reason the shares fail to reach the 415p reserve at auction the building society will go back to members and ask if they still want to sell, or to hold on and wait for a higher price. In practice, the shares are expected to fetch substantially more.

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