Focus Wickes pulls £1bn float amid market woes

Focus Wickes, the do-it-yourself retailer, last night became the latest victim of roller-coaster equity markets when it was forced to pull its £1bn flotation, scheduled for tomorrow.

The group, which was due to price its shares this afternoon, blamed the fallout from the US accounting scandals involving WorldCom and Xerox that have rocked global stock markets and decimated investor appetite for its shares.

The move will derail the tentative upturn in the initial public offerings market, raising serious doubts over the viability of forthcoming new issues such as Yell, the telephone directories business, and Burberry, the luxury goods group. It follows last week's decision by Prada, the Italian fashion house, to abandon its flotation plans for the third time in 12 months.

"This is not the right time to proceed given the volatility of the market conditions," a Focus Wickes spokesman said. "Investors are very nervous about committing until they have got a clear view of how the markets are going to settle."

Yell, which was sold by BT to a consortium of private-equity companies, will reveal today whether it will press ahead with listing. Any share offering is likely to be at the bottom of its indicative 270p to 345p range, valuing the equity at £1.8bn to £2.3bn and giving Yell an enterprise value of £3bn to £3.5bn – well down on expectations.

Sources close to Focus Wickes – which said as recently as Friday evening that it was "optimistic" the flotation would be well received – said its private-equity backer, Duke Street Capital, was "unhappy with the valuation" being imposed by big institutions.

Focus Wickes faced competition from Kingfisher's plans to become a DIY specialist by demerging its electricals business and from the slated flotation of its rival Homebase. It had already reduced its initial pricing indications as a result of the weak equity markets.

The listing, which would have been among the UK's biggest IPOs this year, was intended to raise about £170m to cut debt to £200m. It would have netted Focus Wickes' chairman, Bill Archer, about £150m from his 18 per cent stake while raising £350m for Duke Street, which owns 55 per cent of the retailer.

Analysts have warned that fund managers are unlikely to rush to subscribe to new issues simply to bail out their venture capitalists. In May, a lack of investor support for the private-equity backed Punch Taverns forced the pubs group to pull its flotation only to later proceed at a knocked-down offer price.

While a report from KPMG, the consultancy, found that the number of trading companies seeking a listing in the second quarter of 2002 had more than doubled from a year earlier, the IPO market has struggled to make headway since shares in HMV Group, the music retailer, sank below its offer price on its market debut.

Other flotations that have been postponed due to weak market conditions include Ark Therapeutics, the biotech company, and Leapfrog Nurseries, the child day-care group.

Neil Austin, head of new issues at KPMG corporate finance, said activity was unlikely to return before the markets stabilised. "While sensible pricing has enabled a number of IPOs to get away successfully, recent events have caused further stresses on a relatively fragile market. Although valuations will have to reflect any market fall, the bigger question is whether investors will have any appetite."

Separately, the gaming group Gala gave its strongest hint yet that it was considering a possible £1bn flotation. The bingo and casino operator said it was holding a beauty parade of investment bankers to examine the group's options.