Popular Albright rations investors

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The Independent Online
The public offering of shares in Birmingham-based chemicals company, Albright & Wilson, was four-and-a-half times oversubscribed, causing shares allotted to applicants to be scaled down dramatically.

When the offer closed on Friday the company had received applications for 216 million shares, worth £324m at the offer price. However, only 47 million shares were available to the public. The other 266 million shares were placed with City institutions.

Smaller investors applying for fewer than 400 shares were given their full allocation while those applying for more than 9,000 shares were restricted to a maximum of 3,500 each.

The company was being sold by its former US parent, Teneco, the Houston- based manufacturing conglomerate, as a part of a strategy to concentrate on core manufacturing businesses - making parts for cars, pipelines and packaging.

Albright was the company's only chemical manufacturer. It makes chemicals for a range of products from Coca-Cola to washing powder. The company employs 4,000 in Britain and overseas.

With the shares valued at 150p each the sale raised £460m for the US company. However, the price was well below initial City forecasts of 190p. The difference cost Teneco £125m.

The historic price earnings ratio is 11.7, somewhat below the sector average of 15.

The company justified the low price, saying poor underlying market conditions had been a factor in the decision to reduce the asking price.

Robin Paul, Albright's chief executive, said: "We never put out a forecast. It was analysts that valued us at nearly £600m. The right price is the price the market will pay. If people feel it's a bargain then you get lots coming in. If they don't then they stay away. There is a fine margin between an offer being a bargain or not."

In its prospectus the company said it made £57.5m pro forma profit before tax in 1994 - the fourth-quarter figures being an estimate. Turnover had been estimated at £640m.

A total of 1.5 million shares have been allocated on a priority basis to qualifying employees and to the trustees of the Albright & Wilson profit- sharing scheme and employees' benefit trust, whose applications have been met in full.

Albright & Wilson said it expected that definitive share certificates would be posted to successful applicants on 7 March and that dealings would start the next day.

Refunds for applications not satisfied in full are expected to be posted on 7 March.

Jeremy Chantry, a chemicals sector analyst with Kleinwort Benson, said: "It will prove a rewarding investment for the longer-term investors."