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Alchemy flies out of Phoenix

Alchemy Partners successfully exited its 44% stake in Phoenix IT Group, although the stock offering priced at the bottom of the marketing range. This was positive, however, considering that the sale represented almost 73% of the company.

The IPO priced at 235p, the bottom of the 235p–290p range. Bankers said that investors had been reticent when asked for views on valuation during pre-marketing, and the price range was set slightly wider than the norm as a result of both this, and the fact that the offer represented a considerable sell-down by existing shareholders.

The offer price gave a market cap of £132.2m for Phoenix.

Investor feedback revealed concerns over margins. Phoenix provides IT support services to end- users on behalf of IT providers. This business is high margin, which caused investors concern owing to the contract nature of the work. A lack of comparables had also been an issue. The top of the range put the company flat to preferred comp Synstar. However, many investors viewed UK firm Computacenter as a better comparable. At the bottom of the range Phoenix offered a slight discount to that.

The book was almost entirely UK institutions taking small chunks of the deal. The offer was comfortably covered, but the small-cap nature of the stock precluded multiple coverage, according to one banker. Retention, was good, with significantly less than 10% of the deal traded on the first day, and the stock closed up at 238.5p on November 11.