UK spread-bet firm IG prices float at 125 mln stg

[AussieVamp2]

LONDON, July 4 (Reuters) - Britain's biggest spread-betting company, IG Group Plc, on Tuesday priced its initial share offer, valuing the company at about 125 million pounds ($189 million).

IG said the placement had raised a net 1.15 million pounds for the company at 240 pence per share and that it expected the shares to list on the London Stock Exchange on July 19.

Investec Henderson Crosthwaite, which is handling the flotation, said the price was towards the top of expectations.

"I think it's at the upper end of our original expectations but markets as you know have been fluctuating a bit," said Nigel Tose, corporate finance director at Investec.

"It's a good valuation."

The business, founded in 1974, has grown rapidly in the last 18 months. Unaudited pre-tax profits for the year to May 31 rose nearly three-fold to 10 million pounds from 3.5 million, driven by a big increase in trading volume.

The group, better known by its operating company name IG Index, offers betting to its 20,000 clients on a variety of financial markets such as the FTSE 100 index and individual shares, and now one quarter of its business comes from sports betting.

Chairman, Chief Executive and founder Stuart Wheeler had said he would sell 10 percent of his 42 percent holding which, with dilution from existing staff option holders, would push his personal holding down to 33 percent after listing.

After flotation, staff hold 15 percent of the company and new investors 17 percent. Other existing shareholders, largely Wheeler's friends -- such as Juliet Townsend with 13 percent and director Roger Butler -- hold the remaining 35 percent.

The 17 percent offered to new investors was divided equally with one half offered to existing staff and 12,000 active clients of two years standing, and the rest to institutions.

The group is the first to float of a handful of small spread-betting UK groups, such as Financial Spreads and City Index, while IG has been a leader in the Internet with 10 percent of its business now conducted over the Web.

Wheeler, 65, says he has no plans to retire although he has pocketed around five million pounds at the float from an initial investment of 300 pounds back in 1974.

Under the terms of the offer, Wheeler is locked into the share register for at least another three years.

($1=.6615 Pound)

[AussieVamp2]

IG Index priced above indicative spread
by Phil Cain on 04 July 2000 16:40:00 GMT

UPDATE: IG Index, the pioneering sports and financial spread betting company, announced it will place its shares at 240p a share in its LSE float, valuing the company at £125m.

Stuart Wheeler, IG Index’s chairman and CEO, said the offer had generated strong institutional interest. Before today's announcement Investec Henderson Crosthwaite, IG Index’s sponsor for the flotation, gave an indicative price range of between £100m and £120m. The prospectus will be available online tomorrow and dealings will commence on 19 July 2000.

The company’s trading income in the year to May 2000 was £23.6m, up 94% on the previous year. In the same period its pre-tax profit was up 187% to £10.1 and had generated £6.6m in cash, up from a narrowly negative balance the previous year. Only £2.3m of the cash raise was “free”, because the rest was used to hedge bets with treasury bills.

The public offering, amounting to half of the 9m 17% of shares on offer, will be open only to employees and people who have used IG Index’s services over the past two years. According to Wheeler the offer was not big enough to justify an open retail offer, because shareholdings would be too small if the equity was distributed too widely. Wheeler said that priority would be given to good customers.

The offering will raise £1.15m, which will be used to provide working capital to fund expansion in the UK and abroad, which may mean the acquisition of its competitors.

Finance director Tim Howkins said the company was persuing a “pedestrian internet strategy” and had no intention of becoming a dotcom. Nevertheless, it remains the only spread betting company with a fully functioning internet site. According to Wheeler, around 10% of IG Index’s business is done online, saying that its customers “would do more if we were not so good on the phone”.

IG Index intends to use its internet site as a way to communicate with a new client base in mainland Europe and later in the Far East without the expense of establishing overseas offices. The company currently does around 95% of its business in the UK. Howkins said US regulatory disapproval mean that there is no way for the company to start business in the US.

Howkins said IG Index had recently agreed to piggyback on the interactive services of financial site UK-Invest and sports betting company Coral. But, according to Howkins, the company has “no idea what this [revenue share] will amount to”. Howkins also said IG Index is in the “process of implementing” a WAP service.

In the case of Coral, IG Index will feature on its interactive TV offering as well as its internet site, eurobet.co.uk. According to Wheeler, IG Index’s approaches to interactive TV operators had met with rejection, because its client base was too small, or had produced offers that were too expensive to be justifiable.

With an estimated market share of 50%, IG Index believes it is still the market leader in financial spread betting despite growing competition. Last week Zetters, the LSE-listed betting company, said it would introduce a financial spread betting service. Existing players include City Index, Financial Spreads, Cantor Fitzgerald and Spreadex. But to date IG Index is the only financial spread betting company with an online presence.

In the fledgling sports spread-betting sector IG Index believes it is in second place to Sporting Index, with a market share of around 30%. William Hill, City Index and Spreadex come in close behind. Like other sports spread betting companies, IG Index believes that spread betting has the edge over fixed odds because it still makes for an exciting punt even when a match is one-sided.

Spread betting companies, like IG Index, are also under threat from those selling contracts for difference (CFDs), which carry similar risk and tax benefits to spread betting. Wheeler said that IG Index would tackle such competition head on by establishing a separate company called IG Market, to provide CFD trading primarily to overseas clients. CFD competitors include GNI and CMC, the latter trading under the brand name deal4free.com.

Wheeler calculated that £100 invested when the company started would be worth around £10m when the company comes to market. But he added that that no existing shareholder had sold more than 15% of their holdings.

Wheeler, who founded the company in 1974, is selling 10% of his holding, which at the offer price will bring in around £5m. He has agreed not to sell any shares for a year, at which point he is entitled to sell another third of his shares. After floatation, the Wheeler will own 33% of equity. When asked whether he may retire in the near future, Wheeler said: “I am so exited by the business I will be here for a few years.”