Poundland makes strong debut on London Stock Exchange

Wednesday 12 March 2014 13.52
Poundland and Pets at Home are the latest UK retailers to capitalise on London's buoyant market conditions
Poundland and Pets at Home are the latest UK retailers to capitalise on London's buoyant market conditions

Shares in discount retailer Poundland have made a strong debut on the London Stock Exchange, with the price jumping 33%, valuing the business at £998m.

Shares in the company, one of several British retailers looking to list in London this year, were trading at 396.6p at 12.43pm Irish time, well above the 300p flotation price which had valued the firm at £750m.

Last month Poundland had set the price range for the share offer at 250-300p.

Private equity firm Warburg Pincus reduced its 76% stake in the operator of over 500 stores, which trades as Dealz here, to 37.9%, or 30.4% if an over-allotment is exercised.

Some 50% of the firm's equity will be freely tradable.

Poundland's management led by Chief Executive Jim McCarthy, a 30-year veteran of the retail sector, reduced their holdings from about 24% to 10.2%.

Poundland, the first British discount retailer to seek a public listing, did not issue any new shares to investors in the offer, which raised gross proceeds of £

A source familiar with the matter said the offer was covered over 15 times and that Warburg Pincus, which bought Poundland for £200m in 2010, saw an internal rate of return of over 50%, and a money multiple of 4.5 times on the flotation.

Separately Britain's biggest pet shop group Pets at Home priced its share offer at 245p, giving a debut market capitalisation of £1.225 billion.

Its shares hit a high of 256.25p, up 4.6%.

The firm, which had set a price range of 210-260p last month, is raising £280 million, with major shareholder KKR, the US private equity group, other shareholders and members of the management team receiving £210m.

Following the listing KKR will hold 46.2% of the equity, while management led by Chief Executive Nick Wood will hold 4.3%. Some 40% of its issued share capital would be freely tradable

Today’s flotations follow last month's listing in London of AO World, the online domestic appliances retailer, which saw a surge in its share price above its offer level on debut.

Several other British retailers are seeking listings as consumer confidence improves, including Fat Face, B&M and House of Fraser expected to come to market.

JP Morgan and Credit Suisse were book runners on the Poundland sale, while Bank of America Merrill Lynch, Goldman Sachs and KKR Capital Markets led the Pets at Home offer.