Wellcome share issue looks to be a winner

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The Independent Online
THE pounds 2.7bn Wellcome share issue looked like being a success after strong demand for the shares before the offer closed at 5pm yesterday.

Market sources said Wellcome Trust, the charity that owns 75 per cent of the pharmaceutical group, would be able to sell all the 330 million shares it hopes to offload if it priced the issue at 800p a share. The size and price of the issue will be announced over the weekend, and Wellcome shares will be suspended first thing on Monday morning to enable the price to be stabilised.

It is understood that more than 100 million shares were subscribed for in the public tender offer. In addition, there was a great deal of late interest from British institutions in the service provided by the stockbroker Barclays de Zoete Wedd, in which it will exchange certain shares held by institutions for shares in Wellcome.

The board of the trust is due to meet tonight to decide how many shares it will sell, and at what price. The meeting may be adjourned until tomorrow if the decision is particularly difficult.

The deal is structured so that investors tell Robert Fleming, co-ordinator of the offer, how much they want and at what price, though the trust has said it will not accept offers for shares at less than 800p.

Wellcome's shares, which have fallen 13 per cent since the offer was first announced in June, slipped another 4p to 826p yesterday. Indications were that most institutions had tendered for shares at about 810p.

The fixing of a price was helped by an interview given by David Rough, group director of investments at Legal & General, on the Channel 4 lunchtime business programme. He said he thought the price would be between 800p and 820p but that the trust might have to scale down the size of the issue.

Traders were saying yesterday that if the trust wanted to price the shares at 800p it might be able to sell them all. However, it might choose to cut the size of the issue and go for a higher price.

BZW said there had been a reasonable amount of interest in its share swap. Some institutions had said they did not want to use the service because it would mean giving BZW information about shares that they wanted to sell, so enabling the stockbroker to trade accordingly.

However, as the day wore on these reservations seemed to disappear. 'There are some shares that BZW is prepared to buy which I would love to sell, so if I can get rid of them this way I am laughing,' one institutional investor said.

A BZW executive said that the group had received interest in much more than the pounds 200m of shares it had expected to be offered. However, the system is such that the amount exchanged may be scaled down even if the offer is not.

Some of the joint lead managers of the issue were concerned by the fall in world markets yesterday, which followed a 12 per cent fall during the time of the offer. The FT-SE 100 index fell 22.2 points to 2,377.2 and had been further down at lunchtime. Overnight the Japanese market fell dramatically, and US markets were soft on opening.

The managers were also concerned about investors selling short - selling shares they do not own - to depress the Wellcome share price before the offer closed. The company sent out notices under section 212 of the Companies Act to find out who owned these shares and uncovered at least one institution selling short and buying back more cheaply in the market.