Standard Life 'juggernaut' rolls on towards cut-price float

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Sandy Crombie, Standard Life's chief executive, conceded yesterday that his company's £5bn flotation had become a "juggernaut" which would be difficult to stop, even if stock market conditions continue to deteriorate.

Speaking after launching the company's flotation prospectus yesterday, Mr Crombie confirmed speculation that the insurer had been forced to slash its flotation price, but fought off suggestions that the group should consider postponing its listing.

The bottom end of the range was cut by more than 12 per cent from 240p to 210p a share, while the top end was lowered from 290p to 270p. The reduction will mean that the average value of windfall payments will be slashed by at least £160. Sources close to the flotation said yesterday that most institutional investors were willing to buy in only at the bottom end of the range, given the current market volatility. This would reduce the average value of windfalls to about £1,350.

IG Index, the spread-betting company, said its grey market range for the shares yesterday was 217p to 225p, while Cantor Index said its range was 210p to 220p. "We did have a very serious discussion about all the options open to the board," Mr Crombie said. "But we are very mindful of the fact that this is a juggernaut, and if you stop it, it will take a very considerable effort to restart."

Mr Crombie added that the board had been given real confidence from the emphatic mandate to demutualise at last month's special general meeting - where 98 per cent of members voted in favour. He said research had shown that most members intended to hang on to their shares after the float, so he was not too concerned about the price of the shares on the day of the listing. "We've taken a great deal of advice," he continued. "[Our advisers] have real confidence that this IPO can be done within this range."

As well as the float range, the prospectus contained details of the board's remuneration packages for 2005, as well as the size of their long-term incentive bonuses. Mr Crombie took home £1.362m last year - an increase of 125 per cent on 2004, when he decided to forfeit his bonus. The 2005 package included a bonus of some £686,000, more than 100 per cent of his £656,000 salary. Trevor Matthews, the UK chief executive, was the second highest paid, receiving £1.285m.

In total, the board's 2005 remuneration bill was more than two and a half times larger than the previous year, as the management finally accepted their rewards for turning around the fortunes of the business.

Although the management will not receive any shares as a reward for the demutualisation and flotation of the company, their long-term incentive packages will be converted into shares once the company has listed. Mr Crombie will be awarded shares worth £2.3m as part of the scheme, while Mr Matthews will be awarded stock worth a little less than £1m.

Some 400,000 of Standard Life's 2.4 million members have yet to register for their free shares, with less than a month less until the planned 10 July listing. Those who do not register in time will lose their right to buy shares at a 5 per cent discount before the float. Their free shares and subsequent dividends will be held in a trust for the next 10 years - during which time they will still be able to reclaim them.

News of the lower share price range raised speculation that the group may become a bid target shortly after its float. If it floats at the bottom end of the range, it will be trading at a discount to its embedded value, while its major listed rivals trade at premiums. Bob Yates, the head of European research at Fox-Pitt, Kelton, said: "I don't know there is an obvious bidder for Standard Life. But if one existed then this price range would flush them out."

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