Chip maker tests market for hi-tech stocks with autumn float

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The Independent Online

David Milne and Jim Reid, the co-founders of Wolfson Microelectronics, the first IT company to float for more than a year, will see their combined stake in the business valued at about £14m when the company comes to market next month.

The Edinburgh-based company, which makes chips which sit inside gadgets such as DVD players and games consoles, is hoping to get a valuation of about £200m when it hits the market in October.

Mr Milne and Mr Reid, who set up the business in 1984 and who own about 4.5 per cent and 2.5 per cent of the equity respectively, will not be selling any shares at flotation.

Other significant shareholders include WestLB, which has a 14 per cent stake, and the technology firms Sanyo, with 6 per cent, and Texas Instruments with 2 per cent. Staff own about 20 per cent of the business.

The flotation of the company, which counts HP, Apple and Microsoft among its customer base, will be keenly watched by the market as a barometer of investor appetite for technology shares.

The last technology business to brave market conditions was the IT services company Detica. It got its £88m flotation away in the spring of last year although the price tag was some £14m beneath what it had hoped for.

Mr Milne said the company had thought about floating earlier but had never formally kicked off the process. "We didn't want to go too early. We're now much more secure and, of course, profitable and growing very fast. We just think it's the right time to do it now."

In the year to 31 December, the company made a pre-tax profit of $3.6m, compared with a $1.1m loss a year before, on sales of $33.7m, up from $16.2m. Its biggest customer was HP, which accounted for about 16 per cent of sales.

Wolfson Microelectronics, which outsources all the manufacturing of its technology to companies in the Far East, is said to be hoping to raise about £50m through its flotation.

Mr Milne said: "One reason for raising funds is to strengthen the balance sheet. The other thing we want to do is invest in further new product introductions."

The company, which was spun out from Edinburgh University, recorded a pre-tax profit of $4.1m in the six months to 30 June on sales of $29.3m.

Mr Milne said: "Our strategy is to be a leading international mixed-signal semiconductor company. Our proposed listing will give us the platform to expand the business further to meet our customers' demands."