Inside track

 
David Hellier
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DFS, THE latest company to brave an Initial Public Offering (IPO) in the prickly London market, is quite rightly not taking too many risks when it comes to pricing its issue. Yesterday, bank advisers, which include Jefferies, UBS and Numis (when is Numis not on one of these mid-cap size deals?) indicated they would price the shares at between 245p and 310p, valuing the group at £585m at the mid-point.

Some, who expected the deal to value the group around £1bn, would argue this shows the flatness of the London IPO market. It’s further evidence for them that a flurry of poorly performing deals last year, including AO World and Boohoo, might have spoilt it for everybody.

The reality is slightly different. It’s true the DFS pricing is on the realistic side but it’s not as low as it first seems. The £1bn figure, it emerges, was an enterprise value including around £200m of debt. So, add that to the £585m, and we have an enterprise value approaching £800m.

That’s further evidence of a more cautious attitude to pricing amidst some fatigue amongst investors. But the market’s open for carefully priced issues, with challenger bank Aldermore next on the production line.

david.hellier@cityam.com