News Column

Zoopla, B&M Join London IPO List, But Fat Face Withdraws

May 22, 2014

Anthony Tshibangu



LONDON (Alliance News) - Property website Zoopla Property Group and B&M European Value Retail SA, the cheap fashion retail led by former Tesco boss Terry Leahy, were among four companies that added themselves to London's initial public offering pipeline Thursday.


However, here was a further sign that the market may be starting to struggle as fashion chain Fat Face became the second company this month to cite difficult market conditions for pulling its planned IPO.


Fat Face had originally been looking to raise up to GBP110 million in gross proceeds in its IPO, which was expected to value the company at up to GBP400 million.


"Despite a strong level of interaction with and interest from institutional investors, the company and its majority shareholder have decided to discontinue its plans for an IPO at this stage," Fat Face said in a statement.


The London IPO market has recovered strongly in 2013 and so far this year, after several years of depressed activity in the wake of the financial crisis. The recovery in the market for new issues came as stock markets around the world also recovered, with some indexes pushing to new all-time highs this year.


However, equity markets wavered in early April this year, as technology and biotechnology stocks were sold off, first in the US, and then in Europe. That sell-off was prompted by fears those sectors had become overvalued in the wake of high profile IPOs in the US in recent months, notably those of Twitter and King Digital Entertainment PLC.


In London, high-profile names such as Just Eat PLC, Pets at Home Group PLC and Poundland Group PLC have already floated this year and were well received as retailers, in particular, led the rush to list.


However, in recent weeks, retailers including Card Factory PLC and Pets At Home have seen their share price dip below the level at which they were offered, while energy technology company PassivSystems postponed its initial public offering early this month, citing weak equity market conditions.


Zoopla's IPO is coming at a time when the UK property market has been in recovery mode for about a year, and as some analysts say the market may be becoming overheated. This week, Bank of England Governor Mark Carney warned that the housing market has "deep deep" structural problems and represents the biggest risk to the economy, due to a lack of available homes that's helping stoke a rapid rise in house prices.


Several property companies newly listed or returned to the market last year, including estate agents Foxtons Group PLC and Countrywide PLC, and saw their shares soar as the housing market recovered. The UK's listed housebuilders also saw their shares recovery after valuations plummeted during the economic downturn.


Concerns the housing market may be overheating have weighed on sector stocks in 2014. Foxtons is down nearly 11% and Countrywide is down 8.3%.


Zoopla, which is majority-owned by Daily Mail and General Trust, said its offer is expected to consists of a sale of shares held by existing shareholders including Countrywide and LSL Property Services PLC, giving it a free float of at least 25%. Daily Mail Group confirmed that its 52.6% stake in Zoopla will fall following the IPO.


The company will not issue new shares to investors, but an overallotment option of up to 15% of the total offer will be made available.


Zoopla, which also appointed Mike Evans as non-executive chairman Thursday, said it expects to join the FTSE 250 index after its listing.


The company's website, Zoopla.co.uk, is the UK second largest property search website after Rightmove.co.uk, operated by Rightmove PLC.


Zoopla reported revenue of GBP38.8 million for the six months ended March 31, up from GBP30.3 million a year earlier, with pretax profit up to GBP12.8 million from GBP11.7 million.


In its last financial year, Rightmove reported a pretax profit of GBP97.0 million, up from GBP83.2 million a year earlier, as revenue grew to GBP139.9 million, from GBP119.4 million.


Discount retailer B&M, meanwhile, said it plans to raise GBP75 million in its IPO as it seeks to reduce group debt.


The company is currently owned by private equity firm Clayton, Dubilier & Rice and the Arora family. They will sell a proportion of their shareholding in the offer. However Simon and Bobby Arora will retain the majority of their shareholdings in B&M following the transaction and will continue to lead the business.


B&M said it expects to have a free float of around 20% following the transaction.


For the year ended March 31, B&M reported revenue of GBP1.27 billion, up from GBP998 million a year earlier.


Zoopla and B&M were joined by Hungarian budget airline Wizz Air Holdings PLC and investment advisory River and Mercantile Group Ltd.


Low-cost airline Wizz Air, which flies out of Eastern European cities like Bucharest, Budapest and Warsaw, said it plans to raise EUR200 million on the main market of the London Stock Exchange next month as it seeks to tap growth in Central and Eastern Europe and strengthen its balance sheet.


In its last full year, the company reported a 19% increase in revenue to GBP1.01 billion, with earnings before interest, taxation, depreciation, amortisation and rent up 53% to EUR2451 million.


River and Mercantile Group said it plans to raise GBP12 million on the main market of the London Stock Exchange as its seeks to develop and seed new products.


The company, which will target a free float of 40%, said shareholders including Punter Southall Group Ltd will sell part of their holding under the offer.


For the year ended December 31, the company reported revenue of GBP51.8 million and adjusted earnings before interest, taxation, depreciation and amortisation of GBP14.7 million.








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Source: Alliance News


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