Woolwich debut to net pounds 5bn

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The Independent Online
Around 2.5 million Woolwich members will share in the latest windfall bonanza today as the building society abandons 150 years of mutuality and converts to a pounds 5bn bank.

City analysts expect the shares to start trading at around 320p-330p this morning, valuing the minimum 450-share allocation at pounds 1,440-pounds 1,485. The average allocation of 657 shares would be worth up to pounds 2,168.

The pricing is almost double the figure predicted when Woolwich announced its conversion plans 18 months ago. Its stock market capitalisation of pounds 5bn-plus will put the company in the top 50 of the FTSE 100. However, its entry to the blue-chip league will be delayed until September to allow institutions time to build up their weightings in the stock.

IG Index, which has been running a grey market in the stock, predicts a closing price of 330p-338p today.

Coming after the Halifax float just a month ago, the potentially inflationary effects of another multi-billion windfall is likely to put further pressure on the Bank of England to raise interest rates when its monetary policy panel meets on Wednesday.

Following last week's Budget, which did not attempt to rein in consumer spending as much as predicted, City commentators expect at least a quarter- point rise in base rates from their current level of 6.5 per cent.

Just over 23 per cent of Woolwich members have opted to sell their entitlement immediately while a further 300,000 have yet to claim their free shares. Members who return their forms by tomorrow will receive their shares within five working days.

Woolwich plans a day of celebrations to mark its new status. While the directors will be at the bank's brokers, BZW, to watch the start of trading, staff at the headquarters in Bexleyheath, Kent, are being treated to a special float day lunch.

Speculation about a possible takeover of Woolwich were being played down yesterday. "Speculation has been rife about financial institution mergers over the last few months and we don't comment on these rumours," a spokesman said.

Woolwich says it did not receive a single takeover approach during the entire 18 months of float preparation. Though there has been talk of takeover interest by rivals such as Midland or Lloyds TSB analysts reckon the huge surge in the valuation of Woolwich will act as a deterrent.

Some analysts have tipped Woolwich shares to rise to 350p-370p. But others say the flotation of Halifax represented the high water mark for the financial sector. Halifax shares, which started trading at 775p, have dipped as low as 724.5p since dealings started. On Friday they closed up 8p at 775.5p.

The first auction of Woolwich shares takes place tonight. Members who have chosen to sell their entitlement will receive the average of the prices in the four auctions and the proceeds by 18 July.