Investors responded positively to today's listing of UK betting business William Hill, lifting the share price by as much as 17 pence [7.3 per cent] from a launch price of 225 pence. The price gain lifted the company's value from £950m at launch to over £1.04bn.
The owner of the second largest network of betting shops in the UK raised £700m in an offering jointly led by Deutsche Bank and Schroder Salomon Smith Barney. The price of 225 pence was at the higher end of the 190p to 240p range set during the price talk that had institutional investors signalling a ready appetite for a familiar name in a sector they feel is set to grow.
'With the World Cup reminding everyone what sort of volumes the betting industry can attract, this was an ideal time to list. And the deregulation of the gaming industry in the UK makes this look like a strong business going forward' commented one analyst.
Whatever the outlook for William Hill, more than just the two private equity firms who own 90 per cent of the business – Cinven and CVC Capital Partners – will view the success of the IPO with relief. The edginess of the public equity markets and the volatility of the new issues market in particular had left many private equity firms wondering how and when they might realise a successful IPO exit for some of their portfolio companies.
'It's great to see' commented another GP about today's listing, 'and it's a great reminder that good businesses with a strong story will be able to float: it's just taking more time than some of us would like.'
The company has raised £340m selling new shares in the IPO which it intends to use to pay off debt and buy more betting shops. Cinven and CVC have raised nearly £300m from the IPO and have the option to sell a further £96m of shares over the next few weeks. They will then hold 18 percent of William Hill if the option is exercised in full.
'We are delighted with the response to the flotation of William Hill in what continue to be challenging stock market conditions and we are particularly pleased that the flotation has been in excess of 10 times over subscribed,'' chief executive officer David Harding said in a statement.
Meanwhile, Permira-backed DIY company Focus Wickes has priced its shares within a range of 230-290 pence, slightly below analysts estimates which had put a price of between £1.2bn and £1.6bn on the firm.
The lower value, which gives the firm a value of between £950m and £1.15bn, is seen an attempt by the firm's backers to ensure a successful float on the London Stock Exchange at a time when companies, William Hill excluded, are struggling to make early gains.
The listing, which is due to complete next month, would see Focus come to market ahead of rival DIY firm Homebase, the UK’s third-largest DIY retailer behind B&Q and Focus.
Focus, which is 55 per cent-owned by Permira, is hoping to raise £190m in new money from the listing. Permira's initial investment in Focus dates back to 1987. ING Barings and Goldman Sachs are advisors and joint global co-ordinators for the listing, which is expected to complete in early July.