Aldermore's advisers approached investors with a cut-price offer in a last- ditch bid to save the challenger bank’s stock market float, but failed to pick up enough sales, City A.M. understands.
The firm pulled its initial public offering (IPO) yesterday, blaming “the recent deterioration of global equity markets”.
The bank approached the IPO with high hopes, after a year which has seen successful share sales, including high street bank TSB and specialist lender OneSavings Bank.
It wanted to sell £300m of shares, raising £75m of new money and valuing the firm at £800m.
But it came to market after investors’ appetite had been sated with IPOs, and confidence had been knocked by a weakening global economic recovery.
The bookmakers on the deal – Credit Suisse and Deutsche Bank – had hoped to sell the shares as a positive UK growth prospect, which they hoped would be particularly attractive to US investors. But even at a reduced price they could not cover the book.
However, the failure of Aldermore’s float could help Virgin Money.
The two compete for investors as they are both relatively small banks which represent bets on the strength of the UK economy.
But Virgin may already have an edge – it is a well-known brand, it has a good back-book of the best of Northern Rock’s loans, and it has a track record of moving from a loss into profit.
And with Aldermore out of the frame, it may get another boost.
Even so, Virgin Money’s advisors are cautious on the deal.
“We are still pursuing the IPO and engaging with investors,” said one source close to the deal.
“But we are lucky it is a different situation – we have only announced the intention to float, rather than a price range so there is more flexibility. We are not beholden to any date on the deal.”
The rest of the IPO market is relatively flat compared with the boom period earlier in the year. The two other IPOs currently on the way are drinks firm Fever-Tree, and We Buy Any Car-owner British Car Auctions.
TOUGH TASK FOR THE IPOs TO COME
Virgin Money plans to sell a 25 per cent stake, which could value to bank at £1.5bn to £2bn. It hopes its strong brand and tight retail focus will attract investors who want to benefit from the UK’s economic growth.
Fever-Tree is expected to hit a valuation of £200m in its float on the Alternative Investment Market. But it is only raising £4m of new money, which should not be a stretch for the market even if sentiment is weak.
British Car Auctions wants to sell a 25 per cent stake for £200m. But it may have more difficulty than it hopes as markets hit a rough patch, in part because investors have faced so many floats – Dealogic data show the market has not bounced back from the summer slump.