Flurry of IPO announcements while Fat Face retreats

Diverging fortunes on the UK's market for initial public offerings is raising questions among some investors about the sustainability of a bumper set of offerings so far this year.

While several companies revealed plans for initial public offerings, fashion retailer Fat Face pulled its flotation and Saga prepared to sell its shares at the very bottom of its price range.

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It means Saga's owners - private equity houses Permira, Charterhouse and CVC - will not sell any shares in the float, unless bankers handling the float exercise a so-called "greenshoe" option, subject to demand in coming days.

About a quarter of the equity will be floated, people familiar with the matter said, the minimum required under London's listing rules. Half the shares will go to 100,000 individuals, mostly Saga customers.

The rest will go to institutions, mostly based in the UK but some in North America.

They said the price reflected increased "sensitivity" among fund managers over valuation, as well as a desire to ensure the shares rise when they begin trading, given the large number of its customers who are taking part. Institutional books were due to close at 3pm.

David Vaughan, IPO leader at EY, said there was a feeling pricing on recent deals had been getting a bit frothy, and investors had started saying 'enough is enough'.

"If you look at the prices at which deals having been getting away, it has been towards the bottom of their price ranges - there's definitely been a bit of pushback from investors," he said."

David Lis, head of equities at Aviva Investors, said: "Some of the mania and euphoria has left the IPO market after setbacks to the prices of some of the most highly valued companies."

However, B & M, the discount retailer chaired by former Tesco chief Sir Terry Leahy, said it plans to raise £75m in an IPO that is expected to value the company at about £2.5bn - just short of inclusion in the FTSE 100 index.

Zoopla, the online property listings company that is benefiting from the strong recovery in the UK's housing market, also said on Thursday it expects to float in June in a move that could value the company at about £1bn.

In addition, Wizz Air, the Hungarian low-cost airline, as well as River and Mercantile, an advisory and investment solutions business, have revealed flotation plans.

The contrasting moves by B & M and Fat Face revealed a different judgment on the state of the UK IPO market from two of the most prominent UK businessmen. While Sir Terry is pushing ahead with the B & M listing, Fat Face, chaired by Sir Stuart Rose, is withdrawing its offering.

Fat Face, which is partly owned by private equity group Bridgepoint, on Thursday blamed "current equity market conditions" as the main factor behind the decision, even though there had been "a strong level" of interest from institutional investors.

The fashion retailer, which had been seeking to raise £110m in the float, said it remained "confident in the prospects for the business and will continue to execute the growth plans which are already under way". The retail chain had been expected to achieve a valuation of about £440m, which would have put it just outside the FTSE 250.

The flotation of Zoopla will not raise new money for the property site, but instead will consist entirely of the sale of equity owned by shareholders such as Daily Mail and General Trust, which has a 53 per cent stake, Atlas Venture and Countrywide.

The company will seek a free float of at least 25 per cent.

B & M European Value Retail has 373 stores in the UK and its German business JA Woll has 49 large out-of-town stores. It will have a free float of around 20 per cent and primary proceeds of £75m will reduce net debt and be used for general corporate purposes.

Meanwhile, Wizz Air, which specialises in flights across central and eastern Europe, plans to raise €200m to strengthen its balance sheet and fund further expansion.

The flotation will also involve some of the company's investors - led by Indigo Partners, which has held stakes in Asia and US airlines - selling some of their existing stock. Wizz Air's free float - the amount of shares that can be freely traded - is expected to represent at least 50 per cent of its total equity.

Budapest-based Wizz Air, founded in 2004, is one of a newer breed of low-cost carriers including Norwegian Air Shuttle that are providing increased competition for longer established European budget airlines led by Ryanair.

River and Mercantile was formed by the merger of P-Solve and River and Mercantile Asset Management. It reported earnings before interest, tax, depreciation and amortisation of £14.7m on revenues of £51.8m in 2013.

The company has £8.4bn of assets under management. It said it also managed some £8.5bn of derivatives contracts on behalf of clients.

Additional reporting by Henry Mance and Andrew Parker in London

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