Gartmore price cut by a third as appetite for flotations recedes

Click to follow
The Independent Online

Gartmore has been forced to slash its flotation price by a third after the crisis in Dubai hit investor confidence and threatened to derail its flotation on the London Stock Exchange next week.

The group, one of the best-known fund managers in the UK, announced its initial public offering last month, lifting hopes that it would act as a starting gun for a string of new companies to join the market in 2010.

Only two weeks ago, BofA Merrill Lynch, Morgan Stanley and UBS set the initial range from 250p per share to as high as 330p. A full price would have valued Gartmore at close to £1bn.

However, the fund manager announced yesterday it had set the offer price at 220p, the bottom of a range reduced on Thursday night, valuing Gartmore at £676m. Conditional dealing in the shares starts on Monday.

Chief executive Jeff Meyer said yesterday he remained upbeat. "The IPO represents the logical next step in the development of Gartmore."

Sources close to the group blamed the wider economic turmoil that hit the markets while it attempted to sell the float to potential investors. "In the interim period there has been a bit of misery, what with Dubai crashing and several other IPOs being pulled," one source said. "The range was perfectly reasonable, but the appetite wasn't there at the higher price."

Global markets were rocked when Dubai World, the state-owned investment company, looked to freeze repayments of £16bn of debts last month. The appetite for IPOs was called further into question after Hochtief, the German construction group, pulled the €1bn flotation of its concessions business last week after a lack of interest. Denmark's Scan Energy cancelled its float for similar reasons this week.

A Gartmore insider said: "This does raise questions over the potential for listings. The market is tough. If you don't have a quality offering you may not get it away. If you do, you still have to fight for every pound."

Mr Meyer had been optimistic over the appetite for new companies listing, saying: "We had been talking to our bankers and there are a lot of companies likely to come to the market next year." He added that the company didn't want to get "caught in the queue". Companies looking at listing in the new year include Pets at Home, New Look and Betfair.

This is not the first time Gartmore has attempted to list on the London market. It prepared a £1.5bn float in 2007 but the onset of the credit crunch derailed the plan. The fund manager will use the proceeds and existing cash resources to slash its debt pile of about £400m and look at acquisitions.

Just two companies have listed in London since October, according to Thomson Reuters, down from 29 in the last quarter of 2007.