Nomura placates investors as William Hill float is scrapped
Monday 22 February 1999
In an effort to forestall the anger of investors whose cheques have already been banked, and who were expecting allocations to be announced this morning, Nomura and Cinven/CVC are giving private investors a pounds 20 voucher for a wager on the Grand National. The voucher will be valid at any of William Hill's 1,500 shops in the UK.
Yesterday's move is unlikely to defuse a City row over why Guy Hands, head of Nomura's principal finance business, accepted the venture capital group's offer of pounds 825m for William Hill, after having rejected the same offer from the same two venture capital companies at the turn of the year.
Defenders pointed out that he still made a profit of well over pounds 100m for Nomura, and that the bank was under "massive pressure" from the City not to simply pull the float, one of the options it was considering last week.
Warburg Dillon Read's advice to go ahead with the float, only to see it derailed last week by institutional opposition to the price, is also likely to be questioned.
The float was more than three times subscribed, but last week two key institutions, Deutsche Morgan Grenfell and Phillips & Drew, pulled out, apparently unhappy at Nomura's pricing of the deal.
Some said this proved that the City is not interested in any flotations below pounds 1bn. Others suggested it reflected the lack of growth prospects at William Hill, Britain's second largest betting chain after Ladbroke.
Yesterday Mr Hands commented on the special betting voucher for disappointed investors. "Nomura and Cinven/CVC are putting up the money for this. It's the right thing to do. It isn't healthy if ordinary investors feel they aren't getting a good deal when they dip their toes into the stock market. It will be fascinating to see what the most popular bets are once our voucher has been received."
The private investors, who applied for 124 million shares, equivalent to 40 per cent of the abandoned offer, will also get two weeks' interest at 5 per cent a year on their cheques and get their money back this week, Nomura said.
Under this weekend's sale, John Brown, chief executive of William Hill, will share 10 per cent of the group with the rest of the firm's management. CVC and Cinven will get 45 per cent each.
As for the betting vouchers, Mr Brown said: "We know there are some disappointed investors out there who wanted shares in William Hill. We're effectively saying thank you for your support, here's a chance to make some money out of us after all."
The pounds 20 voucher is for a "double" bet on the Lincoln Handicap on 27 March and the Grand National on 10 April. Punters will need to pick the winner on two of the season's toughest races to scoop a return. The vouchers will be available through the four share shops which handled the float; Charles Schwab, Hargreaves Lansdown, NatWest Stockbrokers and Skipton Sharedealing.
The pulling of the flotation will mean a sharp cut in the fees payable to Warburg Dillon Read and the syndicate of stockbrokers it lined up to handle the issue. Fees could have been as high as pounds 15m if the float had gone through.
The first signs of trouble for the issue appeared last week when Warburg was forced to cut William Hill's proposed float price to 135p a share, from the original indicative range of 155p-175p published at the beginning of the month.
The reduced price valued the bookmaker at pounds 780m instead of pounds 840m-pounds 900m. Cinven/CVC's price was in the middle, equivalent to 150p a share.
Nomura, a division of Nomura Securities, bought the company from Brent Walker Group for pounds 700m in October 1997. It is selling its entire holding.
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