Boart Longyear shares fall in Australia debut

(For more IPO news, data and diary, click on <AU/IPOMENU>)

(Updates with closing price)

By Geraldine Chua

SYDNEY, April 5 (Reuters) - Shares in U.S. drilling services firm Boart Longyear Ltd. (BLY.AX) fell nearly 3 percent in their debut after its A$2.35 billion ($1.93 billion) share offer, Australia's biggest in a decade, as recent market volatility dampened investor appetite for risk.

The shares opened at A$1.87 on Thursday, slightly above their initial public offering (IPO) price of A$1.85, but closed at the day's low of A$1.80 in a weaker broader makret .AXJO.

Fund managers said that while most equity markets had recovered from a global sell-off in late February, the recent volatility had left investors cautious about riskier assets.

"It's only really five weeks since we had an 8 percent correction in one week so certainly investors will have a residual caution about IPOs," said Guy Hutchings, chief investment officer at MFS Investment Management Ltd.

Boart raised a less-than-expected A$2.35 billion ($1.93 billion) in its IPO, with the shares priced at A$1.85, in the middle of a A$1.76-A$2.10 indicative range.

But the IPO was still Australia's biggest since 1997, when Telstra Corp Ltd. (TLS.AX) raised about US$10 billion, according to data compiler Dealogic.

Boart, which counts global miners BHP Billiton Ltd. (BHP.AX) (BLT.L) and Rio Tinto Ltd. (RIO.AX) (RIO.L) as its main clients, has a 17 percent share of the global drilling services market estimated at US$8.4 billion.

Boart Longyear trades at a forward price-to-earnings (P/E) ratio of about 14 times, slightly below similar companies Dyno Nobel Ltd. DXL.AX and Emeco Holdings Ltd. (EHL.AX), which also derive a large portion of their business from Australia's booming mining sector.

Dyno Nobel and Emeco both trade at a forward PE of about 15 times.

Boart was established in 1936 as a DeBeers subsidiary developing industrial applications for waste diamonds, while Longyear began operations in 1890.

Longyear was acquired by Anglo American in 1974 and Boart was merged with Longyear in 1994. Boart Longyear was sold to Advent International, Bain Capital and senior management in July 2005 and a Macquarie Bank-led consortium was introduced as an additional investor in 2006.

A consortium consisting of Macquarie Bank and other institutional investors bought 50 percent of Boart in September 2006. Macquarie alone invested A$93 million for a 17 percent stake, giving Boart a market value of A$547 million.

Based on its current share price, Boart has a market value of about A$2.72 billion. Macquarie Bank will retain a 2 percent stake in Boart.

Macquarie Bank was the lead manager to the offer, while UBS (UBSN.VX) and Goldman Sachs JBWere (GS.N) were co-leads.

($1=A$1.22)

((Editing by Kim Coghill; geraldine.chua@reuters.com; Reuters Messaging:geraldine.chua.reuters.com@reuters.net; +612 9373 1818)) Keywords: BOART SHARES/

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