Man's MF Global IPO hit by worried markets

By Laurence Fletcher and Justin Grant

LONDON/NEW YORK (Reuters) - The flotation of MF Global, the U.S. broking arm of hedge fund firm Man Group, raised a lower-than-expected $2.9 billion (1.4 billion pounds), reflecting a cooler climate for high-flying alternative investment firms.

The initial public offering (IPO) of 97.4 million shares was priced at $30 a share, Man Group said on Thursday, well below an indicative price range of $36 to $39, which could have raised as much as $3.8 billion.

While the IPO, announced in March, is still one of the largest deals of the year, the pricing shows how concerns over the deterioration in the U.S. subprime market have hit investor sentiment, even toward alternative investment vehicles, which have been in high demand with investors.

Private equity firm Blackstone Group raised $4.13 billion last month in the largest U.S. IPO in five years, but its shares have since fallen below their offer price on concerns that a recent boom in leveraged buyouts may be waning and congressional calls for higher taxes on firm managers.

U.S. activist hedge fund Third Point also briefly delayed its London IPO to raise more money from American investors, though it plans to proceed with it this week.

"Despite the negative noise, Man has realised value that had not been recognised adequately in the past via the transaction," Dresdner Kleinwort analyst Michael Sanderson said to clients.

"While the reduction in price is not that significant for the Man stock price, it is unhelpful for sentiment, given that any reduction in an IPO, whether in price or size, is likely to cause an overreaction in the current markets."

At 1050 GMT Man Group's shares, which fell in each of the last three sessions, were up 1.3 percent at 610.5 pence.

"The successful IPO of MF Global completes our strategy to focus on the group's leading position in alternative investment management," Man Group Chief Executive Peter Clarke said.

In March he told Reuters that the broking business had started to have "a separate, stand-alone identity of its own".

Citigroup, JPMorgan, Lehman Brothers, Merrill Lynch & Co. and UBS Investment Bank are bookrunners for the IPO of MF Global. Morgan Stanley, Credit Suisse, Deutsche Bank and Goldman Sachs also are involved in the offering.

Net proceeds from the sale will be distributed to Man Group shareholders in the fourth quarter.

MF Global's shares will begin trading on Thursday on the New York Stock Exchange under the ticker symbol "MF".