Prudential limits Egg share sale to avoid lastminute's mistakes

Prudential, the life insurance group, is to limit the sale of shares in Egg, its direct banking arm, to its one million existing customers in an attempt to avoid a repeat of the lastminute.com flotation fiasco.

Analysts expect the offering of up to 25 per cent of the company to value Egg at £1.5bn to £2bn, only marginally lower than most predicted when the Pru announced its intention to float part of the business in February.

Jonathan Bloomer, Prudential chief executive yesterday confirmed plans to float the business next month. He said he was keen to learn from the mistakes of lastminute.com, whose shares have underperformed since flotation in the wake of widespread disenchantment among investors about the way Morgan Stanley, its advisers, dealt with the strong demand.

A new board structure has been unveiled for Egg's public offering. Roberto Mendoza, one of JP Morgan's leading merger and acquisition specialists, is joining as chairman. Richard Delbridge, who quit as finance director of National Westminster Bank after Royal Bank of Scotland took it over, is joining as a non-executive director. Mike Harris, the brains behind Egg, steps back to become vice-chairman responsible for strategy.

Those applying for Egg stock will be allowed shares worth up to £1,000. The application procedure will be entirely online and payment will be by direct debit rather than cheque, giving the sponsors no opportunity to bank the cheques and keep the interest in the event of demand for the shares outstripping supply.

Only those who were customers of Egg at midnight on 22 February will be able to apply. Shares will also be offered to employees of Prudential and Egg. The prospectus is to be published on 22 May.

Mr Bloomer said that this was a better time to offer shares than in February, when dot.com stocks were fetching "crazy" valuations. "Egg is not a concept business. It is a substantial business with £9bn of assets, £500m of capital and one million customers." He said Prudential would retain a majority stake.

Analysts believe Egg could make £100m a year profit and a return on equity of 15 per cent by 2002. Egg lost £150m last year.

Prudential shares closed up 5p at 939.5p.