Umbro scales price back by one-third to secure IPO

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The Independent Online

Umbro, the maker of England football shirts, was forced to slash the price of its flotation by one-third yesterday, after institutional investors balked at the initial share price range being offered by the company's bankers, Cazenove.

Market sources said last night that Umbro's shares would be priced at 100p when they float on 3 June, indicating the 84-year-old company would be valued at about £145m. That is a significant discount to the 150p to 190p it was aiming for, which would have raised more than £200m.

Umbro has also had to climb down on plans to raise more than £70m by listing its shares, hoping instead to make about £50m in new money through the float.

The reduced price will hit Umbro's chief executive, the former footballer Peter McGuigan, personally. Initially, his 8.4 per cent stake was set to be worth in the region of £10m.

The decision to go ahead with the pricing, which will be formally announced this morning, surprised some in the market who had thought Doughty Hanson, the private equity firm which owns the majority of Umbro's shares, would shelve the plan. However, those close to the company said it had decided to press ahead because there was considerable appetite in the City for the sports company's equity. They added that the cut in the price reflected wider turbulence in the market in the past few weeks.

That uncertainty would also spell bad news for other companies planning to sell shares in themselves in the coming weeks. They include Halfords, the car and bicycle accessories maker, and Admiral, the motor insurer. Halfords is aiming for a valuation of about £627m, with an initial range of between 250p and 300p for its shares. Its management and bankers, at Merrill Lynch and Citigroup, are currently holding roadshows to drum up support for its flotation, with pricing expected next week.

Sources said yesterday that Halfords had not been affected by the problems which Umbro has run into, and that the company was confident of being able to price itself comfortably within its initial range.

However, a series of bankers emphasised that the mood has turned in the past few weeks compared with the beginning of the year, when share prices were rising and there was strong appetite for new floats.

One head of equities said: "It is a buyers' market. If you want to come to the market in the current climate you have got to accept lower funds raised, or lower valuations."

Another added: "There has been a turn in the market in the past few weeks and people feel on the back foot. Anyone coming to the market over the summer is going to find it difficult, and they will have to come at the right price and with a reasonably good pipeline of news."

Doughty Hanson had aimed to make the most of Euro 2004 football fever by floating Umbro in the lead-up to next month's tournament in Portugal. But bankers said the project was not able to overcome the wider malaise in the market.

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