Norwich members offered further shares at a discount

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The Independent Online
Almost three million members of Norwich Union, the UK mutual insurer seeking a stock market flotation, will be able to buy further shares at a 10 per cent discount, it was announced yesterday.

Members will pay 25p a share less than the strike price for the pounds 2.4bn offer, which is to be fixed in an institutional book-building exercise.

Norwich Union said it was setting aside shares worth an estimated pounds 800m especially for members. A further pounds 400m will be clawed back from institutions if, as expected, demand from members is high enough.

Part of the total sale includes pounds 670m of shares which are to be sold for the benefit of members living in the United States and a number of other countries where it is legally difficult to allocate free shares.

The company estimates the public offer price of its shares will be in the range of 240p to 290p, with members offered the discount on a minimum further investment of pounds 400. Other retail investors will have to buy at least pounds 1,000 of shares. All members have already been allocated a minimum of 150 free shares, with a typical windfall of between pounds 800 and pounds 1,000.

George Paul, NU chairman, said: "[We are] keen to encourage members to continue to participate in the future of the group. I hope that they will take advantage of this opportunity to buy further shares."

Alan Richards, a director at First Marathon, the corporate finance house, said: "The price of the shares will depend on the book-building exercise. But I would be surprised if the price wasn't at the top of the range and the discount is attractive. Financial services shares have done very well recently, although shares are quite frothy."

Mini-prospectuses and application forms are to be sent to members now, with 10 June set as the deadline for receipt of applications.

The company said it expected its market capitalisation to be up to pounds 5.6bn. Of this, some pounds 3bn will be issued in the form of free shares to members, with the rest sold off in an international offer. Senior management set out on a roadshow yesterday to sell their story to investors.

Richard Harvey, group chief executive elect, said the average free share distribution will be in the range of pounds 1,524 to pounds 1,840, with 43 per cent receiving the 300 share minimum, worth over pounds 720.