Jupiter resists tough markets to price IPO

LONDON Wed Jun 16, 2010 5:04pm IST

LONDON (Reuters) - British fund firm Jupiter raised 220 million pounds ($340 million) to pay off debt in an initial public offering which had been dogged by weak markets but still secured a valuation in line with London-listed rivals.

In a deal that will secure a 33.5 million pound windfall for fund managers and directors, Jupiter said it was selling shares for 165 pence, toward the bottom of a 150-210 pence range and valuing the London-based firm at 755 million pounds.

The deal gives Jupiter shares a price to earnings multiple of about 10.8 times for 2010, with peers such as F&C on about 9 times and a sector average of around 12.

One head of UK equities at a large fund firm said: "It seems like a reasonable price and, given the market conditions, we can expect an uplift to the offer price. It is already trading (in the grey market) at around 175 pence to 180 pence."

The stock will debut Monday.

Jupiter announced its IPO in mid-May amid hugely volatile markets which have continued to struggle. The FTSE All Share index is down 1.6 percent since the IPO announcement.

Jupiter said it would issue 133.5 million new shares, more than previously indicated, using the proceeds to pay off debt dating from a private equity-backed management buyout in 2007.

The IPO was over 2.5 times subscribed, sources said.

Jupiter's senior staff include chief executive Edward Bonham Carter, brother of actress Helena Bonham Carter, who will hold 3.5 percent of the company, worth around 26 million pounds after selling shares worth around 3.5 million in the offer.

Star fund managers Tony Nutt and Philip Gibbs will bank 5.7 million pounds and 4.1 million respectively from selling shares.

Private equity backer TA Associates will hold around 22 percent, a stake worth around 168 million pounds.

LARGE ORDERS

A banking source familiar with the transaction said the IPO saw a large number of orders for more than 30 million pounds with one placed for 100 million pounds.

The deal could have priced higher with a lower quality order book less dominated by long-term investors, the source said, adding around 80 percent of orders came from British investors while U.S. funds accounted for around 10 percent.

Companies seek to maximize the shares sold to long investors rather than hedge funds to reduce price volatility.

Jupiter's IPO was in contrast to rival Gartmore's listing late last year which priced below the original price range and now trades well under the offer price.

The banking source said while many investors raised concerns about Gartmore, they were appeased by Jupiter's more stable revenue stream which is less dependent on performance fees.

Jupiter is also less exposed to so-called 'key-man risk' where a small number of managers run much of a firm's assets.

"You always have keen man risk. But at Gartmore, you have (star manager) Roger Guy who was responsible for a third of assets whereas in Jupiter, you probably have a dozen who are equally important." said Oriel Securities analyst Keith Baird.

Jupiter's funds have fared pretty well over the past year.

According to data from fund research firm Lipper Jupiter's funds with more than 100 million pounds in assets have returned an average 25 percent in the 12 months to end-May. That means they have outperformed rival funds by an average 3.5 percentage points in the period, and benchmarks by 1.6 points.

The IPO valuation was equivalent to 3.6 percent of assets under management, valuing it above rivals such as Schroders and Aberdeen, valued at 2.2 percent and 1 percent respectively.

Gartmore, similarly sized in terms of funds under management, is valued at less than 1 percent of assets after a scandal-hit first six months of trading.

Man Group's agreed deal for GLG Partners announced last month valued the hedge fund firm at about 7 percent of assets.

(Editing by Dan Lalor)

($1 = 0.6465 pound)

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