Private equity-owned fund manager Gartmore plans to list in London in a move which could kick-off a much-touted run of initial public offerings among companies owned by cash-hungry buyout firms.
Gartmore, which was bought out by management in 2006 backed by US firm Hellman & Friedman, will list an about 30-50% stake to raise £500m to £500m in the country’s biggest IPO this year, people familiar with the matter said.
Hellman & Friedman’s stake will fall below a majority position from about 52% at present, a company spokeswoman said, although she declined to give further details.
The listing – which is expected by year-end and would value Gartmore at about £1bn – would represent the first private equity IPO in the UK since 2007, according to data from the Centre for Management Buyout Research.
Gartmore employees, who own the remainder of the company, are also poised for a payday as staff are expected to sell around 20 percent of their overall holdings. The balance of the directors’ and employees’ shares are subject to staggered lock-in arrangements that expire in 2013.
The firm will use the proceeds from the listing to pay down the debt taken on for the MBO and added to in a refinancing the following year. Net debt of some £400m at end-September 2009 will be cut to £150m, the company said. The debt does not come due until 2014.
Hellman stays on board
Gartmore CEO Jeff Meyer said in a conference call that Hellman & Friedman would keep its two representatives on the board after the flotation.
The company had considered an IPO in 2007 for up to £1.5bn. These plans were put on ice due to the financial crisis and in April, a senior Gartmore executive played down the likelihood of an IPO because of the state of the markets.
However, the recent surge in equity prices has reignited interest amongst private equity firms to list portfolio businesses.
Private equity investors are showing signs they are ready to accept lower returns in exchange for getting some cash back when portfolio firms come to float in what could be a crowded market for new issues over the next year.
“We are a conservative firm, a firm which does not need leverage other than for the purpose of the buy-out and we thought it was an opportune time to de-lever,” Meyer said.
Meyer said that although the IPO timetable was “not cast in stone”, he expects it to go ahead by mid-December.
As at end-September Gartmore and its subsidiaries had £21.8bn of assets under management and had attracted £924m of net inflows in the third quarter of 2009.
BofA Merrill Lynch, Morgan Stanley and UBS Investment Bank are acting as joint global co-ordinators, joint bookrunners and joint sponsors in the IPO. Citi is acting as joint bookrunner and Fox-Pitt, Kelton is acting as co-lead Manager