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Royal to raise $1.3bn from Oz IPO
SYDNEY, Australia (Reuters) -- Britain's Royal & Sun Alliance Plc said on Monday it hopes to raise up to A$2.1 billion ($1.3 billion) from a float of its Australasian units, braving tumbling stock markets to launch Australia's biggest IPO in five years. Royal & Sun, Britain's second-largest general insurer, plans to list its Australian and New Zealand insurance and fund management operations in May despite a trend by companies globally to steer away from initial public offers (IPOs) as war rages in Iraq. The insurer has been forced to seek the listing -- the largest for Australia since 1998 -- amid pressure to raise capital and clean up its balance sheet as weak stock markets and asbestos claims hurt earnings. Institutional investors are being offered shares in the businesses, recently re-branded Promina, at A$1.50 to A$2.00 per share to raise A$1.6 billion to A$2.1 billion. Retail investors are being offered a 10 cent per share discount on the institutional price. "It seems reasonable at the low end,'' said Terry Gray, head of equities for Allianz Dresdner Asset Management. "I suspect it may struggle to get much above the low end that's being quoted.'' IPO droughtThe Promina float is by far the largest due in Australia this year. A A$500 million float of Richard Branson's Australian airline Virgin Blue was tipped for June but looks like being put on ice until the aviation sector improves. Globally, there have only been five IPOs in the United States in the first quarter of this year -- the lowest figure since 1978 -- and none on the London Stock Exchange. Royal & Sun and its bankers played down the prospects of pulling the float if the Iraq war escalated but said it would not sell stock below the price range. "It is not for sale at any price,'' said Michael Everett, head of Australian Equity Capital Markets at joint manager Goldman Sachs. Promina's assets include Australia's largest motor vehicle insurer, AAMI, and the Australian Pensioners Insurance Agency. The company forecast a 2003 net profit of A$188 million, with the dividend forecast at 7.1 cents a share. London-based Royal & Sun's earnings have been hit by costly claims from asbestos, floods and the September 11, 2001 attacks on New York, compounded by falling stock markets that have eroded the value of most insurers' equity assets. It is slashing 10,000 jobs globally to help bridge a gap between the capital it holds and what it could pay out in claims. The shortfall was 700 million pounds at the end of 2002. Royal & Sun failed to find a trade buyer for parts of the Australian businesses after more than a year shopping them around following a wave of consolidation in Australia's insurance sector. Retail investors wooedPromina Chief Financial Officer Harold Bentley told Reuters the company hoped a strong dividend yield would attract a high proportion of retail investors. Roadshows would be held in Australia, New Zealand, Europe, the United States and Asia over the next six weeks to drum up institutional support. All the proceeds from the float of up to 1.057 billion shares will go to the London-based parent, except A$150 million if an over-allotment option is fully exercised. Chief Executive Mike Wilkins said Royal & Sun expected to fully sell down its Australian and New Zealand operations, although there was still a chance it could keep a minority stake. Promina provides death and trauma cover to Australian armed forces personnel that does not exclude claims that occur as a result of war. Wilkins said the group had made provisions for 25 additional claims. It also made a A$100 million provision in 2002 to deal with potential asbestos claims. The retail offer opens on April 14 and closes on May 2. The institutional price will be determined on May 7 to May 9 with a final price announced on May 12, the day it expects to list. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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