Gartmore's Christmas flotation set to buoy IPO market

Published on Friday 20 November 2009 21:20

FUND manager Gartmore yesterday confirmed plans to list before Christmas in a move likely to value it at £1 billion, sparking hopes of a run of initial public offerings of private equity-backed companies.

Gartmore, which is part owned by San Franciso-based private equity firm Hellman & Friedman, expects to sell a 30 to 50 per cent stake to investors, raising 500 million to 550m in the process. This would value the firm, which has 21.8bn of funds under management, at about 1bn.

The listing will be the London Stock Exchange's biggest IPO this year and would represent the first private equity IPO in the UK since 2007, according to data from the Centre for Management Buyout Research.

The US private equity firm owns just over 50 per cent of Gartmore after backing a 550m management buyout in 2006.

The firm will use the proceeds from the listing to pay down the debt taken on for the MBO, as well as further debt added in a refinancing the following year. Net debt of some 400m at end-September 2009 will be cut to 150m. But the float is not driven by desperation as the debt does not come due until 2014.

Gartmore employees, who own about 48 per cent of the company, are also poised for a payday. Staff are expected to sell around 20 per cent of their overall holdings.

Jeff Meyer, chief executive of Gartmore, said Hellman & Friedman would keep its two board representatives, H&F managing director Patrick Healy and Blake Kleinman, H&F's London-based director, after the flotation.

The company had considered an IPO in 2007 for up to 1.5bn, but that was put on ice due to the financial crisis. However, the recent surge in equity prices has reignited ambitions among cash-strapped 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.

Gartmore's 2008 accounts show its turnover plummeted 47 per cent to 119.5m as the slide in equity markets hit the fees it earned on managing investors' funds. Pre-tax profits fell 17 per cent to 46.1m and assets under management slid 31per cent to 18.8bn. But since the beginning of the year, assets under management have recovered strongly – up 17 per cent to 21.8bn in the last quarter alone.