* Saga shares rise slightly after pricing at 185p/shr
* Issue price is at the bottom or 185-245p range
* Conditional dealings start, unconditional set for May 29
* Latest listing to experience IPO market turbulence
(Recasts with opening share price performance, adds CEO
comment, background and detail)
By Freya Berry
LONDON, May 23 Shares in Saga Plc, a
UK travel and insurance company specialising in the over 50s,
rose slightly on their debut on Friday, giving some relief to
its crowd of retail investors after the issue price was cut to
the bottom of its preset range.
Saga shares were trading on a conditional basis at 188 pence
by 0800 GMT, after the company set a price of just 185p on the
stock which it had previously priced at between 185p and 245p.
Conditional dealing allows banks and brokerages to trade
shares between themselves and stabilise the price of an initial
public offering before the stock is available to trade more
generally. Unconditional trade starts on May 29.
The issue price valued the company at 2.1 billion pounds
($3.5 billion). Half the stock was bought by institutions such
as pension funds and half by retail investors.
Saga had initially looked set for a strong debut because of
the strength of its brand and robust finance performance, but
the market for flotations in London has lately become more
Greetings card retailer Card Factory saw its
shares decline after the start of dealings and fashion retailer
Fat Face pulled its flotation plans.
Saga had intended to sell both new shares to raise fresh
capital to pay down debt and existing shares held by its private
equity backers. However the company is now only selling 550
million pounds of new shares.
A source close to the deal said the decision was due to the
company's desire to appease its loyal customer base with a firm
"aftermarket" performance, at the expense of the private equity
groups who had sought to begin selling their investment.
"Clearly there are some tensions," the source said. Saga
customers had been asked to pay a minimum of 1,000 pounds to buy
into the issue.
The firm is owned by private equity groups Permira
, Charterhouse and CVC. Saga had
said earlier in the process that Acromas, Saga's parent company
which holds a 72 percent stake, was expected to sell shares in
But a sudden turn in the fortunes of company debuts led Saga
to focus on selling new shares rather than flooding the market
with part of its investor's holdings.
"They (the private equity firms) are barely going to sell.
This is the worst-case scenario," said a banker on the deal,
adding that the flotation process had been "frustrating".
Acromas was created by the private equity consortium in 2007
when Saga was merged with another investment, the Automobile
Association (AA), best known for providing roadside assistance
The private equity houses have the option of selling 15
percent of the shares, or 82 million pounds of shares, in an
over-allotment or "greenshoe" option should demand prove strong
Otherwise, they are subject to a 180-day lock-up.
CVC declined to comment. No one at Permira or Charterhouse
was immediately available for comment.
Private equity firms generally seek to sell their
investments after four to six years.
"We have been very pleased with the level of demand for Saga
shares from both retail and institutional investors," said
Executive Chairman Andrew Goodsell, adding that the offer had
Two sources close to the deal said the listing had been
oversubscribed by about 3 times, with 1.7 billion pounds of
total demand, including 800 million pounds of retail offers.
The listing was run by Citi, BofA Merrill Lynch
, Credit Suisse and Goldman Sachs. JP
Morgan and UBS were bookrunners, while
Investec and Mizuho were co-lead managers. STJ
Advisors advised on the deal.
(Editing by Greg Mahlich and David Holmes)