News Column

UK MIDDAY BRIEFING: Lloyds Prices TSB IPO Below Book Value

June 9, 2014



LONDON (Alliance News) -Lloyds Banking Group Monday set the price range of the initial public offering of TSB Banking Group PLC on the London Stock Exchange at between 220 pence to 290 pence per share, which would value the spun-off retail bank at about GBP1.28 billion at the mid-point of the range.



Lloyds said it expects to offer 125.0 million TSB shares to investors, representing a quarter of the TSB's shares. Another 10% stake could be sold through the over-allotment option on the IPO.



However, with TSB's book, or net asset value, at about GBP1.50 billion, Lloyds is set to sell the shares at at least a small discount - 15% at the mid-range of the proposed pricing - amid signs of cooling investor appetite for IPOs.



Lloyds is selling off TSB, which has 632 branches, in response to European Commission demands made as a condition of Lloyds receiving state aid in the midst of the financial crisis. It will sell down its stake in TSB in tranches, but must complete its exit by the end of 2015.



It expects the final pricing of the offer to be announced on or around June 20, with conditional dealings to begin on the London Stock Exchange on the same day.



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FTSE 100: up 0.2% at 6,873.68

FTSE 250: down 0.2% at 16,197.16

AIM ALL-SHARE: flat at 805.15

GBP-USD: flat at 1.6802

EUR-USD: down at 1.3613

GOLD: up at USD1,256.00 an ounce

OIL (Brent): up at USD109.27 a barrel

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Top UK Corporate News

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Sports Direct International said it is once again seeking shareholder approval for a bonus share scheme for executives, including founder and Deputy Chairman Mike Ashley, which could net them up to 25 million new shares contingent on performance targets. The new shares would represent about 4.2% of the company and be worth GBP204.1 million in total at current prices. Ashley holds 57.71% of Sports Direct shares, after selling a 4% interest in the company for GBP204 million in April. The company said that Ashley's invitation to participate in the scheme reflected the fact that he has received "no remuneration for his substantial contribution to the company since its initial public offering in February 2007" and the fact that he is not participating in the 2011 executive bonus share scheme.

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Man Group said it is to acquire Pine Grove Asset Management LLC, a fund of funds manager with about USD1.0 billion in assets under management. Pine Grove Asset Management, founded in 1994 and currently owned by its employees, is a fund of hedge funds manager that specialises in managing credit-focused hedge fund portfolios. Man Group said that Pine Grove has delivered attractive risk-adjusted returns across market cycles since its inception. The hedge fund did not disclose the financial details of the transaction, which is expected to close in the third-quarter, but a person familiar with the deal told Alliance News it is not material, adding that further information is expected with Man Group's first-half results.

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Carillion said that its 50:50 joint venture with Lafarge Tarmac has won a highways maintenance and construction framework deal worth about GBP100 million from The Midlands Highway Alliance, a civil engineering and road schemes buying collaboration between about 20 local authorities. The deal is for three years, and the Alliance has the option to extend it for a further year. Works covered by the deal include the reconfiguration of highway layouts, construction of road and bridgeworks, resurfacing and associated enabling works, said Carillion.

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EE is poised to pull out of its relationship with Carphone Warehouse Group in a move that threatens the retailer's GBP3.6 billion merger with Dixons Retail, The Telegraph reported at the weekend. EE, a joint venture between Orange SA and Deutsche Telekom AG, is reviewing its consumer retail strategy, with a conclusion due "within weeks," and a complete withdrawal from Carphone Warehouse the potential results, the newspaper said. Deputy Chief Executive of Orange Gervais Pellissier urged EE to "get rid" of third party retailers and deal with customers directly last week, the report said. The review will also look at EE's relationship with Phones4U LLC, and the report said EE would end its relationship with one or the other, or both. A spokesperson for EE told Alliance News that its review of its distribution strategy and talks with "all relevant parties" are continuing.

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AIM MOVERS

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Leni Gas & Oil has jumped by almost a third after it said its GY-665 well at the Goudron Field in Trinidad has now intersected 687 feet of gross oil bearing sands in its primary target, the Gros Morne formation, and the company has therefore decided to shorten the planned total depth of the well, which will reduce risk and hasten the time to production. LGO said the well will now be logged and cased, before being completed as a Gros Morne producer, while its previously planned secondary targets will be drilled by one of the other wells being drilled at the site. Eckoh is doing well after the secure payment products provider said it has signed a five-year exclusive agreement with an unnamed US-based provider of business process outsourcing and communication services to distribute Eckoh products across the US. Snacktime is up 9.4% after it said it has raised GBP570,000 gross through a subscription for new shares that will provide the company with working capital and the means to reduce its debt. The subscription will increase Boris Belotserkovsky's stake in the company to 26.14%, from 7.3% previously. Hightex Group has lost nearly a third if its value after it posted a widened pretax loss on nearly halved revenue in 2013, hit by operational problems at its Brazilian joint-venture company. Hightex said receivables from its Brazilian joint venture have been cast into doubt due to difficulties in obtaining financial information. Great Western Mining Corp is also down sharply, even though it said it has completed nine holes at its M2-Smith copper target in Nevada, and that assay results from its recent drilling has shown a further five discovery grade and thickness copper intercepts. Blue Star Capital is down after it raised GBP150,000 through a share subscription with institutional and private investors, money it will use to fund its working capital needs and repay a shareholder loan, leaving it free of debt. Distil is also down, even though it reported a narrowed pretax loss in the year to end-March, despite seeing revenue decline as it shifted its business model to focus on its own brands and away from third-party distribution. Its loss narrowed thanks to lower costs, and after the previous year was hit by exceptional costs relating to a failed acquisition. Escher Group Holdings is another faller after it warned that it will now recognise just under a third of outstanding licensing revenue of USD6 million in the first half of 2014, due to a customer roll-out taking longer than expected. It expects to realise USD1.8 million in the first half, with the remainder pushed back into the second half.

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Top Economics And General

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China's imports fell 1.6% year-on-year to 160 billion dollars in May, the government announced Sunday. Imports in April had risen 0.8%, up from March's 11.3% decline. Exports were valued at USD196 billion, up 7% year-on-year, customs data showed. Exports rose 0.9% in April, recovering from March's decline of 6.6%. Total foreign trade volume increased 3% to USD355 billion, the General Administration of Customs reported. The trade surplus for the month stood at USD36 billion.

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Confidence among Japan households improved more-than-expected in May, monthly survey data from Cabinet Office showed. The consumer confidence index rose to a seasonally adjusted 39.3 in May from 37.0 in April, well above the economists' forecast of 37.6. The survey was conducted on May 15.

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Bulgaria suspended work on its portion of Russia's new South Stream natural gas pipeline, Prime Minister Plamen Oresharski said Sunday, after the EU raised concerns about the way contracts were awarded. "The project will continue after we remove points of contention raised by Brussels," he said in Sofia. South Stream is a 2,380-kilometre pipeline planned to transport Russian natural gas to Italy, with branches to Greece and Austria, via the Black Sea and across the Balkans, from 2015. The move pits the EU further against Russia, which is keen to proceed with the project because it would allow Russian gas to bypass Ukraine. Gas disputes have marred relations between Moscow and Kiev, including during the current crisis in Ukraine.

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Former army chief Abdel Fattah al-Sissi was sworn in Sunday as Egypt's president, vowing to end unrest after three years of instability. "Vanquishing terrorism and fulfilling security top my priorities," he said in an inaugural speech. "There will be no tolerance or appeasement towards anyone who resorts to violence and seeks to block the march towards the future." Egypt has been gripped by deadly violence since July, when the army toppled Islamist president Mohammed Morsi, Egypt's first democratically elected leader. The architect of Morsi's overthrow, al-Sissi pledged to achieve social justice and building an investment-friendly environment in Egypt.

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The election of Libyan Prime Minister Ahmed Mieeteg was unconstitutional, the country's Supreme Court ruled on Monday. Mieeteg was appointed by the Islamist-dominated parliament last month. However, the decision required 120 votes, a tally that was only achieved when extra members voted after Congress' deputy president had officially closed the session. That variation from legislative rules had led to calls from opposition members in the General National Congress that Mieeteg's appointment was improper. The court agreed, the al-Wasat website reported. Caretaker premier Abdullah al-Thinni has insisted that he remains the legitimate prime minister, even though Mieeteg's appointment was triggered by al-Thinni's decision to resign, after he said his family was attacked.

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At least 79 bodies were found in northern Afghanistan, which has been hit by torrential rains and flash floods, and many more people were still missing, an official said Sunday. More than a thousand homes in the district of Guzargah-e-Nur were swept away in the flooding that began late Friday, said Javid Basharat, the police spokesman for Baghlan province.

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The Nigerian military barred the distribution of major newspapers citing "grave security implications." Among the newspapers were The Daily Trust, The Nation, Leadership and Guardian, which were stopped from circulation on Friday and Saturday across the country. On Sunday morning in Kano, vendors were still to receive their copies. The military has said that sensitive material concerning security are being dispatched by some newspaper's vehicles across the country.

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Afternoon Watchlist (all times British Summer Time)

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No major events

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Tuesday's Key UK Corporate Events

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CML Microsystems Full Year Results

Park Group Full Year Results

Sepura Full Year Results

Carclo Full Year Results

Oxford Instruments Full Year Results

Phoenix IT Group Full Year Results

Energy Assets Group Full Year Results

Ted Baker Interim Management Statement

Spirit Pub Company Q3 Results

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Tuesday's Key Economic Events (all times British Summer Time)

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00:01 UK BRC Retail Sales Monitor

02:30 China Consumer Price Index

02:30 China Producer Price Index

07:00 Japan Machine Tool Orders

07:45 France Industrial Output

09:00 Italy Industrial Output

09:30 UK Industrial Production

09:30 UK Manufacturing Production

10:00 Italy Gross Domestic Product

12:30 US NFIB Business Optimism Index

13:55 US Redbook index

15:00 UK NIESR GDP Estimate



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Contact: +44 203 668 7440; newsroom@alliancenews.com; @AllNewsTeam






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