SThree prices at the low end

UBS priced the UK IPO of recruitment company SThree, highlighting the willingness of investors to come in on smaller deals that offer a growth story and actually hold on to the stock that they have been allocated.

The stock came from the co-founders, members of management and other employees, as well as private equity firms Barclays Private Equity, 3i, Gresham and Parallel Ventures Nominees. The co-founders have provided the 6m-share greenshoe.

The deal saw existing shareholders sell 39.7m shares, representing 28.8% of the company. The offer was marketed with a market cap of £275m–£300m, as there were a number of convertible preference shares due to convert into £181m of stock based on the IPO price.

That made a share price range less meaningful, as the number of shares to be issued would vary according to pricing. Pricing came in at the lower end of the range, at 200p per share, giving a market capitalisation of £275.9m and a total deal size of £79.4m.

The stock was placed with a small number of Continental European and UK long-only institutions that are not expected to trade it actively before the next set of results in January. The small book was a result of the specialised nature of the company, as it is focused on information and communication technology recruitment.

Pricing at the low end of the marketed range was in part due to the cyclical nature of the business and concerns about the current stage of that cycle. On its debut on Friday, the stock traded up to 205p, with just 3.3m shares going through the market in the morning.

Meanwhile, the privatisation IPO of majority state-owned defence company QinetiQ, which has been estimated at around £500m, will not take place until next year. The deal had originally been pencilled in for pricing on December 12, but that would require pre-marketing to start this week. It is expected to take place in Q1 2006 through joint bookrunners CSFB, JPMorgan Cazenove and Merrill Lynch.