Bradford & Bingley float valuation scaled back to £1.5bn

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The Independent Online

The estimated stock market value of Bradford & Bingley, the building society that will convert to a bank on 4 December, is thought to have been dramatically cut by its adviser Goldman Sachs.

The estimated stock market value of Bradford & Bingley, the building society that will convert to a bank on 4 December, is thought to have been dramatically cut by its adviser Goldman Sachs.

The investment bank, which is guiding Bradford & Bingley on its flotation, has revised its assessment down from between £1.75bn and £2.2bn last December to a range around the £1.5bn mark, according to City sources. The move follows a fall in share prices across the mortgage bank sector this year.

The lower value is likely to mean that Bradford & Bingley's 2.7 million members who will qualify for the basic allocation of 250 shares will see their windfall reduced to about £600, compared with earlier estimates of £800. Some members, who have a savings account and who also borrow from the building society, will receive 500 shares.

The news comes after Bradford & Bingley said it would start sending letters to members today to ask them if they want to sell or keep their allocations. Members will not see the lower assessment of the business value, which is being circulated in the City to a limited number of institutional investors.

Analysts said, however, that in reality the price would be slightly higher than Goldman's estimate, which would be conservative to avoid the possibility of the shares falling below the offer price when trading begins.

One analyst said: "It will probably trade at about twice underlying price to book, which would be the same as Halifax and Abbey National, bringing it into the range of £1.7bn to £1.8bn."

Bradford & Bingley would not say how many of its members, who voted in record numbers for conversion, are expected to cash in their shares immediately. Steven Crawshaw, Bradford & Bingley director of strategy, said: "We know it is near to Christmas so a lump sum will be very attractive to some. The system in place is capable of selling all of our members' shares if necessary."

Among other former building societies, about 23 per cent of Halifax's members and 40 per cent of Northern Rock's opted for cashing in their shares.

Members of Bradford & Bingley who choose to sell their shares must return a form confirming their decision by 24 November. Their shares will be sold in the auction on the first day of trading and they will receive a cheque for the value of shares on about 12 December. Bradford & Bingley will levy a £10 charge on members who sell their shares to cover the costs of dealing.

Members who want to retain their shares must also return a form to the building society and will have their shares kept in a nominee account.

The lower value of Bradford & Bingley's business will heighten speculation that it will form an attractive bid target after flotation. However, as a newly converted building society, Bradford & Bingley would be able to take full advantage of its five-year protection against hostile takeovers.

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