Hicks Muse makes £232m from Premier IPO

The US buyout firm has made a partial exit from the UK food retailer following a decision to reduce the issue price.

Dallas headquartered buyout firm Hicks Muse Tate & Furst has sold £232 million (€350 million; $430 million) worth of shares in the initial public offering of UK food retailer Premier Foods on the London Stock Exchange.

Premier listed at 215 pence per share, the bottom of its revised price range, down from 230 – 260 pence per share, valuing the company at £527 million.

Following the offering that was more than two times subscribed, the shares traded strongly and closed at 219 pence yesterday. Hicks Muse will retain approximately 30 percent of the company, a stake that could be reduced to just over 20 percent if an over-allotment option is exercised.

The reduction in price of the Premier initial offering reflects the jittery nature of the IPO market this summer for private-equity backed flotation candidates. Pan-European private equity firm Doughty Hanson has already suffered a double setback at the hands of the public markets this year in relation to two of its portfolio companies.

The proposed Frankfurt IPO of German automotive operator Auto-Teile-Unger was aborted in May due to “adverse market conditions”, although the company was subsequently sold to KKR the following month. Doughty's flotation of UK sportswear maker Umbro on the London stock exchange was successful, although it was priced at 100 pence per share, significantly below the original 150 – 190 pence indicative range.

Other successful flotations this summer that have priced towards the bottom of their indicative range include KKR-owned German cash machine maker Wincor Nixdorf and CVC Capital Partners’ IPO of Halfords, the UK car and bicycle parts retailer.

Virgin Mobile, which cut its indicative price range by approximately 20 percent, down from 235 – 285 pence, made its debut at the very bottom of its new range on 200 pence per share when it listed on the London Stock Exchange this morning.

Hicks Muse acquired Premier Foods as Hillsdown Holdings in 1999 for £822 million, before adding brands purchased from global food companies Nestle and Unilever and streamlining non-core operations.

Earlier this week, Hicks Muse announced a change to its compensation structure. Instead of the previous model – whereby investment team members shared carry from all of the firm’s investments, both in the US and Europe – the new structure reportedly ensures that the European team will get around 93 percent of the profits from the new Europe II fund.