This emerged yesterday as Woolwich promised its 2.57 m illion members share payouts worth an average of pounds 1,233 when it floats on the market on 7 July.
Woolwich has rejected the controversial flat-rate payment chosen by Alliance & Leicester, and will instead link bonuses to the size of account and the length of time it has been held.
Industry experts said the valuation has gone up because the recovery in the housing market has fuelled share price rises at Abbey National and Lloyds TSB. These are among the benchmark shares used to help set the stock market value of the converting societies. There are also fewer qualifying members than expected, raising the average bonus.
The rise in the benchmark shares also brings good news for the 9 million investors at Halifax Building Society, who should get precise details of their payments later this week.
Analysts estimate the Halifax's flotation is now worth at least pounds 12bn, up from initial estimates of pounds 10bn, so members could get shares averaging at least pounds 1,400 when it floats in the summer. Northern Rock's flotation is now expected to top pounds 1bn. The Woolwich will hold a vote on its flotation on 11 February although most members are expected to vote before then by post.
John Stewart, chief executive, and his wife will receive 1,474 free shares for membership rights held as depositors or as mortgage borrowers with the society.
But he and his fellow directors are foregoing share payouts to be made to employees and will not have any share incentive schemes until 1998.
"By that time we'll have a settled share price and it will be fair to do that. This way there's complete transparency and no question of any of the directors benefiting from the flotation," he said.
The total cost of the flotation is pounds 49m, of which pounds 6.5m will eventually go in fees to Schroders, the investment bank advising Woolwich. Schroders and BZW, which is acting as stockbroker, estimate Woolwich would have had a market capitalisation of between pounds 2.96 bn - pounds 3.38 bn, and a mid- value of pounds 3.17bn, had the conversion happened on 20 December 1996.
This implies a price per share of between 175 and 200p which gives a mid-price of 187.5 pence.
Each of the 2.57 million people who qualify as members will receive a basic distribution of 450 free shares, which will be worth pounds 844 at the mid-price of 187.5p per share.
The Woolwich said 1.1 million of these members, who are investors of at least two years' standing, will get an additional distribution of up to 2,000 more shares, depending on the balances in their accounts on key dates.
It expects 60,000 of its savers to be entitled to the maximum distribution of 2,450 shares. If those savers also hold mortgages with the society they will receive 2,900 free shares.
Members who are not eligible to vote, because they had less than pounds 100 in their accounts on 31 December 1996, or because they are under 18, will receive a cash bonus of 10 per cent of the value of their investment on 31 December 1996.
The society had cast some doubts on the publication of its transfer document because of a new Building Societies Bill which means societies that become banks will lose a five-year protection against takeovers if they make bids for other financial institutions.
Comment, page 17Reuse content