STANDARD LIFE looks increasingly likely to be a bid target shortly after its planned flotation as the grey market for its shares was set at the bottom of a reduced range announced by the insurer.
In a prospectus mailed to one in six UK households, Europe’s biggest mutual insurer said that the range for its shares at flotation on July 10 would be 210p to 270p, down from an estimated 240p to 290p in April.
Standard Life blamed the fall on plummeting equity markets. UK life insurance stocks have plunged 15 per cent since the range given in April.
The announcement was a disappointment for the mutual’s 2.4 million eligible members, who had expected an average windfall of £1,700, based on the mid-point of the earlier range. The average will fall to £1,530, Standard Life said.
IG Index, the financial spreadbetter, set a grey market range for the shares of 217p to 225p, while Cantor Index put it at 210p to 220p. A Cantor spokesman said: “It could be folly to be too ambitious in terms of pricing this issue. It’ll need to look cheap to entice fund managers and investors.”
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The reduced flotation price will see the new company’s market capitalisation fall from an expected £5 billion to £5.5 billion, to £4.35 billion to £5.25 billion. That would see Standard Life listing at close to its embedded value — a method used by insurers to measure their value — which could make it a more attractive acquisition, analysts said.
Resolution, the listed closed life fund consolidator, is known to have approached Standard Life in the weeks before it announced its intention to float. The approach was rejected by the mutual’s board as not offering value for members, compared with a float.
AXA, the French insurer, was also thought to be interested in the mutual but may have sated its taste for UK insurance businesses with its purchase this week of Winterthur, Credit Suisse’s insurance arm. Bob Yates, the head of European research at Fox-Pitt, Kelton, said yesterday: “This price would leave it vulnerable to a bidder if there was an obvious bidder.”
The pricing of the flotation will be announced on July 9. Brian Stewart, Standard Life’s chairman, said the price level was heavily dependent on the appetite for the stock of both instutions and members.
The investor roadshow begins today.
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“There will be an intensive effort to sell to institutional investors and the level of demand will decide where the price is set,” Mr Stewart said yesterday.
“Policyholders are smart — they know markets can go up and down and will see this as a real opportunity to go for it.”
Shareholders will get a 5 per cent discount on preferential shares, with a range of 199½p to 256½p. The mutual said that its first dividend, payable in May next year for the second half of 2006, would be about 5.4p per share.
FLOTATION COUNTDOWN