Two companies pressed ahead with large stock market flotations yesterday despite the disappointing debut of HMV Group, the music retailer.
Shares in Intertek Testing Services, a company which tests, inspects and certifies products such as textiles, toys and chemicals, will be priced at 400p to 490p a share, valuing the group at about £660m. This is lower than the £750m price tag anticipated when the company announced its floatation last month. The company will raise £245m from the float to pay down debt and redeem preference shares.
Separately, Wood Group, the oil services company based in Aberdeen, said its shares would be priced at 175p to 210p, valuing the business at about £923m. Conditional dealings in the shares are expected to start on 29 May, with unconditional dealings on 5 June.
Both companies will be navigating choppy waters with their floats. HMV was priced at the lower end of its range at 192p a share earlier this week. But the shares immediately went to a discount and yesterday closed at 177p, down 0.5p on the day. William Hill, the bookmaker, is also close to announcing float plans in a deal which could value the group at up to £1.4bn.
Richard Nelson, chief executive of Intertek, said he was confident of guiding his company to the market despite current conditions. "Based on the feedback we've had so far, people seem very happy. The pricing has to depend on the market situation. But personally, I have never known such opportunities for this company."
Intertek was a £380m management buyout from Inchcape in 1996, backed by Charterhouse Development Capital. The board will have a 7 per cent stake in the floated company but it is committed to not selling any shares in the float. The shares start conditional dealings on 24 May.
A spokesman for Wood Group, whose chief executive is Sir Ian Wood, echoed Intertek's comments. "This is not a consumer business. It's not a UK-focused business and it doesn't have private equity getting out. The company has a long-term growth strategy."
Institutional shareholders already own 23 per cent of Wood Group, including Aberdeen Asset Management and Standard Life. It is seeing another 130 institutions over the next three weeks.
Commenting on the outlook for new flotations, John Hatherly, head of research at M&G, said: "The response to placings and rights issues earlier in the year was positive, but selective, and the same is likely to apply to the IPOs. People [institutions] are obviously going to be cautious. They'll be saying 'what are the prospects, why are you doing it and what are you doing with the funds being raised?' More than anything, issues will need to be priced conservatively."
Mr Hatherly said it was possible that one major float may be pulled if the market became saturated. Other floats in the pipeline include Focus Wickes, Yell, Homebase and Burberry, the luxury goods retailer.
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