Zeneca rights to be priced between 550p and 650p

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The Independent Online
SG WARBURG and Barclays de Zoete Wedd will spend today taking last- minute soundings of institutional investors about the pricing of the pounds 1.3bn rights issue from Zeneca, the drugs and agrochemicals arm of ICI, as it prepares for its demerger.

The two advisers spent Friday canvassing support for a range of prices between 550p and 650p and the early indications are that it will be set towards the bottom end of that range.

At 580p, it would need a one-for-three to raise the pounds 1.3bn required but if ICI manages to get the deal underwritten at 600p, it would need only a two-for-seven.

The pricing is complicated by the fact that Zeneca will not be split from ICI until next month, so there is no market price on which to base the rights.

The last price quoted on the grey market operated by Salomon Brothers - before it was stopped at the request of the London Stock Exchange - put Zeneca's shares at about 700p and new ICI's at 550p. An 18 per cent discount from that - about the average for recent rights issues - would give a price of about 570p.

ICI has already promised a dividend of 27.5p from both companies. At an ex- rights price of 700p, the shares would yield about 5 per cent, and the rights 6 per cent - an attractive premium to the market average of about 4 per cent.

It also puts the group in line with other pharmaceutical stocks, such as Glaxo, which have a prospective yield of about 5 per cent.

The cash call will take the total raised through rights issues this year to more than pounds 5bn, compared to only pounds 3.8bn in the whole of 1992. Companies that have called on shareholders include Royal Insurance ( pounds 404m), Asda ( pounds 347m), Commercial Union ( pounds 428m), Kingfisher ( pounds 313m) and Trafalgar House ( pounds 205m).

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