Direct Line IPO boosted by US intervention

 
David Hellier
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DIRECT Line Group yesterday celebrated a successful float as its shares jumped by more than seven per cent – however City A.M. has learned that London’s biggest initial public offering (IPO) in 17 months was heavily reliant on demand from US institutional investors.

More than a third of the initial tranche of shares were bought by American funds, an unusually high amount for a London listing.

RBS, which was forced to sell the insurance business by EU regulators, yesterday offloaded 30 per cent of the group, raising £787m. Priced at 175p, the shares finished a day of limited trading at 188p. The offering was popular with retail investors, who got 15 per cent of the shares available, buying an average of £5,000-£6,000 each.

UK institutions snapped up around 40 per cent of the stock, closely followed by the 35 per cent that went to American funds. European institutions took the remainder.

“US investors are comfortable with IPOs, the UK and the insurance sector,” chief executive Paul Geddes told this newspaper yesterday. “Part of the roadshow was in New York and Boston – we raised £500m of debt there last year. But that’s not to say that we have not got some very good UK shareholders on board.”

He insisted he was not concerned by the fact his company is set to miss a FTSE 100 place: “It wasn’t in itself a target. I can do nothing about it.

“The roadshow has been good. It’s always good to meet investors face to face and explain things like the regulatory changes – but now I’m champing at the bit to get back to the business,” he added.

The rest of the business – which owns brands including Direct Line, Churchill and Green Flag roadside recovery – is expected to be sold in two further issues by the end of 2014.

Investment bankers will be hoping that the successful float will revive a moribund market and encourage other large unlisted companies to consider an IPO.