Valuation of LRC to test market's nerve for initial public offerings

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The Independent Online

Bridgewell, the boutique investment house, is believed to be earning £5m in fees from the £50m float of the loss-making Local Radio Company, which experts believe could prove a crucial test of investor appetite for initial public offerings in the UK.

Bridgewell, the boutique investment house, is believed to be earning £5m in fees from the £50m float of the loss-making Local Radio Company, which experts believe could prove a crucial test of investor appetite for initial public offerings in the UK.

The company, which last year reported a loss of nearly £4m, will today unveil details of an IPO which will value it at more than four times annual revenues.

On Monday LRC bought Radio Investments, a collection of 22 local radio stations owned jointly by GWR, Guardian Media Group and Caledonian Investments.

Radio Investment will immediately be floated under the LRC name through a so-called accelerated IPO arranged by Bridgewell.

Jonathan Goodwin, a partner at LongAcre, the leading media corporate finance house that has advised on recent deals including Mori's £55m recapitalisation and the £45m management buy-in of Chrysalis Television, believes the £50m float represents a premium to the price that trade buyers were willing to pay for LRC's assets.

"This is a fantastic deal for GWR and GMG who will have achieved a premium to Radio Investment's strategic value through the public markets," said Mr Goodwin.

People familiar with the IPO believe the float will seek to raise £10m of working capital, valuing LRC at £50m.

Bridgewell is said to be earning fees of 10 per cent - or close to £5m - for arranging the financing for the company.

The new company is being led by Richard Wheatly, the former chief executive of Jazz FM, who yesterday declined to comment about LRC's plans following its listing.

Bridgewell is underwriting the issue of new shares in the company. Andrew Walsh at Bridgewell said the fund raising had gone well and he believed the company would attract a strong retail following as well as institutional interest.

Unit trust companies including ISIS Asset Management and Framlington have invested in LRC on the expectation that it will be able to increase revenues from national advertisers and spin-offs such as music events and CD sales.

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