SYDNEY: London-based Royal & Sun Alliance (RSA) plc is hoping to raise up to A$2.1bil from a float of its Australasian units, braving tumbling stock markets to launch Australia’s biggest initial public offering (IPO) in five years.
Britain's second biggest general insurer plans to list its Australian and New Zealand insurance and fund management operations in May despite a trend by companies globally to steer away from IPOs as war rages in Iraq. The company has been forced to do so amid pressure to raise capital and clean up its balance sheet as weak stock markets and asbestos claims hurt its earnings.
Institutional investors are being offered shares in the businesses, recently re-branded as Promina, at A$1.50 to A$2 per share to raise A$1.6bil to A$2.1bil. Retail investors are being offered a 10-cent per share discount on the institutional price.
The Promina float is by far the largest due in Australia this year. An A$500mil float of Richard Branson’s Australian discount airline Virgin Blue was tipped for June but looks like being put on ice until the aviation sector improves.
Globally, there have only been five IPOs in the United States in the first quarter of this year – the lowest figure since 1978 – and none on the London Stock Exchange.
Promina’s assets include Australia’s largest motor vehicle insurer AAMI, and the Australian Pensioners Insurance Agency. The company has forecast a 2003 net profit of A$188mil and a dividend of 7.1 cents a share.
RSA earnings have been hit by costly claims from asbestos, floods and the Sept 11, 2001 terror attacks on New York, compounded by falling stock markets that have eroded the value of most insurers’ equity assets.
It is slashing 10,000 jobs globally to help bridge a gap between the capital it holds and what it could pay out in claims. The shortfall was £700mil at the end of 2002.
All the proceeds from the float of up to 1.057 billion Promina shares will go to RSA, except A$150mil if an over-allotment option is fully exercised.
The retail offer opens on April 14 and closes on May 2. The institutional price will be determined on May 7 to 9 with a final price to be announced on May 12, the day Promina expects to list. – Reuters
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