ADVISERS to UKFI’s £3.3bn sale of shares in Lloyds Banking Group faced an interesting conundrum earlier this week when the offer for sale of shares was covered nearly three times.
The joint bookrunners from Bank of America Merrill Lynch and UBS were asked to consider whether either the size of the deal should be enlarged or the price increased. In the end they recommended leaving both size and price the same, a decision accepted by the seller.
The banks argued that enlarging the offer would have brought in a larger number of hedge funds and disrupted the balance between them and the long-only funds and the decision to do that appears justified by the trading in the aftermarket so far. On offer at 75p each, the shares were trading around 77p yesterday, suggesting they were sensibly priced.
Another issue the advisers and the seller wrestled with was when to make the trade, the most important sale of shares that UKFI has yet made.
The seller had been speaking to banks informally about timing for several weeks and had decided at least to wait until an OFT report on Lloyds branch sales had been published.
There was a very real chance the sale could have gone a few days earlier, once that OFT report had come out, but the bookrunners advised against it.
Many of those on the deal had huge praise for the deal captain from UKFI, Naren Ramachandran, who turned out to be a key negotiator in the deal. “He was very thoughtful and focused,” said one who worked with him.
Robin Budenburg and Jim O’Neill, who stood aside from the process of choosing advisers since he is going back to Bank of America Merrill Lynch, were the senior advisers at UKFI.
GREAT IPO, WITHOUT MUCH COMMENT
THE FINANCIAL public relations industry will no doubt be looking on with some trepidation at the success of the Foxtons IPO. Unlike most other groups coming to market, Foxtons, the somewhat racy estate agency chain, has come to the market without employing a financial public relations group to smooth the way.
The money-raising exercise looks to be going down a treat with investors but some, especially PR advisers, say there’s more to advising on an IPO than that.
“If you’re creating a new entity, that entails developing relationships with a whole group of people who will be looking at your business in the future,” says Andrew Grant, the public relations veteran that runs Tulchan. Interesting to observe, going forwards.