Feltex Puts Low Value on Shares

Aulkland, New Zealand, May 25--Feltex Carpets yesterday priced its $254 million share offer at the bottom end of expectations as New Zealand's biggest issue in five years drew a lukewarm response from institutions. The offer, which will see owner Credit Suisse First Boston Asian Merchant Partners pocket $193 million as it exits the business, will make the firm a top 30 listed company when it debuts on the New Zealand stock exchange on June 4. Fund managers were not surprised at the $1.70 a share price, from an indicative range of $1.70 to $1.95 set for an auction to institutions, given the float's size and recent issues sold by private equity investors in Australia. "Just Group and Zinifex ... a few of them have been repriced then traded below the bottom end of the range," said one fund manager, who declined to be identified. "There's maybe a wee bit of nervousness in the market for IPOs on the back of that," he said. The float, New Zealand's largest since Contact Energy in 1999, comes amid a wave of share offerings which have seen 13 companies, mostly small-cap stocks, list this year after two years of slim pickings. "There are so many issues out there at the moment that the institutions can pick and choose," said a source close to the Feltex float. "They've got a fair bit of leverage coming into a situation like this." Feltex's owners sold 113.5 million shares into the offer and 6.5 million to senior management. An additional 29.4 million new shares will be sold by Feltex. The company expects to pay a dividend of 6c a share in October 2004, and at the issue price it will have a gross dividend yield of 9.6 per cent for the year to June 2005. Feltex ranks with Godfrey Hirst as one of the two largest carpet-makers in New Zealand and Australia, producing more than 17 million square metres a year, a quarter of the carpet produced in the two countries. It bought the Australian operations of the world's biggest carpet maker, Shaw Industries, in March 2000 and has wool scouring operations. It produces wool yarn, tufted carpet and woven carpet in New Zealand and Australia. But the likelihood of a slowdown in New Zealand's housing boom, which has driven demand for furnishings, coloured the view of some market participants, who believed the best had now passed. "We just thought the risks in that business are higher than some of the ones we currently have investments in," said one fund manager. Feltex predicts a net profit after tax but before amortisation and writeoffs of $26.5 million this year, falling to $25.9 million in 2005. Feltex offer * Carpet maker Feltex Carpets is selling $254 million in shares. * The float is New Zealand's largest since Contact Energy in 1999. * Feltex makes wool yarn, tufted carpet and woven carpet.

Related Topics:Shaw Industries Group, Inc.

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