Saatchis get cut-price float away after legal hitch

Shares in M&C Saatchi, the advertising agency created by Lord Maurice and Charles Saatchi, finally started trading on the stock exchange yesterday, but not until they suffered a delay of several hours due to an 11th-hour legal threat from an individual who had been rejected as a business partner by the agency.

Shares in M&C Saatchi, the advertising agency created by Lord Maurice and Charles Saatchi, finally started trading on the stock exchange yesterday, but not until they suffered a delay of several hours due to an 11th-hour legal threat from an individual who had been rejected as a business partner by the agency.

Saatchi, which had been due to launch its shares on the market at 8am yesterday, held off for a few hours while it informed institutional investors about the potential legal claim. Shares started trading at 12 noon, with an opening price of 125p, valuing the business at £68m. The shares rose 3.5p to close at 128.5p. While sources close to the company were keen to stress that it had not suffered serious difficulties in drumming up interest among investors, it has still had to take a substantial price cut on the value of its shares due to the general weakness of the IPO market.

The 125p level was well below the 143-164p range that Saatchi's bankers, Lehman Brothers, were touting around the City only last week.

The price cut will mean smaller windfalls for Saatchi's founding partners, who will now receive £3m in cash, compared with £3.5m to £4m under the previous pricing range.

The five founding partners - David Kershaw, who is to be chief executive of the new public company, Bill Muirhead, Jeremy Sinclair as well as the Saatchi brothers - will also receive shares worth £5m. They have carried out their plan to sell 40 per cent of their stakes in the float and will be left with control of 48 per cent of the public company.

While institutional dealing began in Saatchi's shares yesterday, they will be available to the public from Wednesday on the junior AIM market.

It is understood that the company does not regard the intended legal action, which came to light on Thursday night, as serious, and does not plan to include details of it in the prospectus it will publish next week. M&C Saatchi has grown into a top 10 agency in the UK, and now has 13 offices around the world and 600 employees. It made pre-tax profits of £7.5m last year on revenues of £59m.

It plans to use the revenues from the listing to accelerate its European expansion.