CSR pricing shows investors regaining appetite for floats

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The Independent Online

A flood of stock market flotations was predicted yesterday by brokers after three companies made highly bullish announcements regarding initial public offerings (IPOs).

Cambridge Silicon Radio (CSR), the technology group, announced it had raised £78.7m from its IPO with shares being priced by broker CSFB at 200p, at the top of its 160p-200p range. The shares closed the day at 246.25p revealing strong demand. At the same time Eircom, Ireland's biggest telecoms group, announced plans to float on the London market in the first half of March, raising at least ¤300m and valuing the business at ¤3.5bn, including ¤2.2bn of debt. OHM, a new oil exploration company, also said it would proceed with its £30m flotation, while on Wednesday Civica, another technology company, said it planned to float with a value of £79.2m.

There is now a growing list of companies preparing to come to the market with nearly 40 companies already planning IPOs, both on the full, official list of the London Stock Exchange (LSE) and on AIM, the LSE's junior market. The activity is expected to increase as the year develops, making 2004 almost certainly the busiest year for floats since the height of the boom in 2000. According to LSE figures, there were just 17 floats in the whole of 2003 on the main market, with a value of £4.7bn, while AIM saw 66 IPOs in 2003 with a total of £1.6bn.

Brokers believe that institutions are showing a renewed appetite for good quality companies but are far more discerning than in the previous technology-led IPO boom. Tim Linacre, the chief executive of capital markets at Lazard, the investment bank which recently bought brokers Panmure Gordon, said: "There is appetite for good quality companies without a doubt, but institutions are being very selective so advisers are having to be careful. Institutions are being very straightforward and severe. They are looking at businesses and saying: 'If we invest in this, will we make money?' They want the IPO to be properly done, the business to be in excellent shape with a strong growth story, and properly priced and structured."

Brokers are coming up with ways for good quality privately owned companies to float, allowing their backers to sell 100 per cent of their holdings, further encouraging IPO activity.

Numis, for instance, is floating Centaur, a media company, for about £140m-£150m. It has formed a new company to buy the business, which it pays for by simultaneously issuing shares to institutions. This is a new form of the so called "accelerated" IPO pioneered by Collins Stewart to handle last year's Center Parcs float. Centaur pulled a float in 2001, since when profits declined but investors are still keen to back the group, further reflecting the strength of the IPO market.