Float expected to value insurer at around £2.6bn
Direct Line Group’s flotation will value the insurer at around £2.6bn – below the projected £2.7bn to £2.9bn – the Financial Times reports.
Citing sources close to the flotation, the FT said the books could be opened to prospective investors as early as today, with a valuation mid-point of about £2.6bn.
This valuation is 1.04 times Direct Line Group’s net tangible asset value of £2.5bn, but lower than the £2.7bn to £2.9bn range analysts were predicting.
According to the FT, institutional investors had indicated they would demand a discount.
A prospectus is expected by the end of this week.
Direct Line Group’s parent, Royal Bank of Scotland (RBS), has to float at least 25% of the insurer’s shares in the initial public offering on the London Stock Exchange, but the FT reports that the actual amount floated might be slightly higher at 30%.
A successful offering of this first portion of Direct line Group could net RBS between £700m and £880m.
RBS has to sell a majority of its stake in Direct Line Group by the end of next year and the entire stake by the end of 2014 as part of the condition of its government bail-out during the financial crisis.
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