Smurfit Kappa has realised an additional €195 million from its initial public offering (IPO) through the exercise of over-allotment arrangements, a move that brings the net proceeds of its formal flotation next Tuesday to €1.495 billion.
After a strong uplift in conditional grey market trading on Wednesday and Thursday, shares in the packaging group gave up 3.67 per cent to close 40 per cent weaker last night at €18.10. However, they remained well ahead of the IPO price of €16.50.
The allocation of an additional 11.82 million shares - 15 per cent of the original offering - at the IPO price was the maximum allowable under the terms of the transaction.
The fresh allocation, exercised by Deutsche Bank in its capacity as stabilisation manager, brought the stabilisation period to an end.
The total number of Smurfit Kappa shares in issue will be 217,444,348 after its formal admission next week to the Dublin and London markets.
The group plans a "progressive dividend policy". It will pay a final dividend in May 2008 in respect of its performance in 2007 and an interim dividend in October 2008 in respect of the six months to June 2008.
Based on Smurfit Kappa's current capital structure, the group's flotation prospectus said it would have paid an "illustrative" dividend of €0.32 per share for 2006 if it had been listed on the Irish exchange in that period.
The successful sale of shares this week to institutional investors was achieved against the backdrop of renewed volatility on global stock markets in light of increasing concern about the poor quality of "subprime" mortgage lending in the US.
The offering is known to have been significantly oversubscribed. In a note yesterday, Goodbody Stockbrokers analyst Liam Igoe said the over-allotment exercise reflected "strong demand" for the stock. "This will further reduce the group's debt post the flotation," he said.
Smurfit Kappa said its free-float will be in the region of 41.7 per cent after the flotation.
Private equity firms Madison Dearborn, CVC and Cinven, which hold most of the balance of the equity in the group, will not be entitled to sell down their stake until the expiry of a lock-in, 180 days from Tuesday.
All but some €110 million of the IPO proceeds will be used to pay down Smurfit-Kappa's high-yield notes. The group will pay some €50 million in penalties for the early redemption of bonds and pay IPO expenses of €53 million. It will have net debts of some €3.5 billion after the flotation.
Smurfit Kappa described the transaction as the largest primary offering within the Irish market and largest capital and equity raising in the paper packaging sector.
British institutions have some 50 per cent of the new stock, with US-based institutions taking up some 20 per cent of the offering. Irish institutions have 10-15 per cent and the balance went to investors in continental Europe.
Retail investors were excluded from the IPO.
