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Catlin toils to hit IPO target

Lloyd’s insurer Catlin refused to comment today on speculation that its impending 1 April flotation may value the company below its initial pricing estimates.

The speculation comes only three days ahead of the company’s planned IPO, which was announced to the London Stock Exchange in a press release dated 17 March.

In the statement, Catlin said it expected to float on the London Stock Exchange at between 350p and 420p, an estimate that valued the firm at between £560mn ($1,018mn) and £664mn ($1,208mn), including the estimated $200mn proceeds of the sale.

With Catlin’s shareholders’ equity at $839mn (the figure reported on 31 December 2003 plus predicted proceeds), this would suggest a multiple of market capitalisation to book value of between 1.2-1.44x.

But with only two days left to complete the book-building process, sources suggest Catlin’s long-awaited IPO may struggle due to lack of demand for a float at this premium – and estimates from some quarters have suggested a valuation as low as 1.1-1.3x net asset value.

As one analyst told Insider Week: “There are millions of brokers running around London pushing the Catlin story very hard at the moment. This is not going to be an easy one to get away. Originally a figure of £800mn was being banded about – but that has fallen to £600mn or less.

And he suggested a number of reasons for the lack of investor appetite: “It’s a big float; it’s at the peak of the cycle and they’re raising a lot of money. It’s definitely an odd time to be raising this kind of capital. Why invest for 2005 when it’s clear that 2005 won’t be as good as 2004?

But Catlin head of communications Jim Burke said: “We’re optimistic that the IPO will conclude satisfactorily, but, of course, at this time we cannot comment on what the final offer price will be.

Catlin, which raised $482mn in private equity funding in 2002, has been planning for an IPO since last year and has employed an unusually high number of blue-chip investment banks to help push the offering. In addition to the three joint sponsors Goldman Sachs, JP Morgan and UBS, there are four co-leads: Cazenove, ABN AMRO Rothschild, Citigroup Capital Markets Ltd and Fox-Pitt, Kelton.

Catlin said 1 April is the day for final pricing and that unconditional trading begins on 6 April, 2004.

Correction: In Insider Week No.114, we suggested Catlin’s IPO valuation was between 1.6-1.9 times multiple of market capitalisation to book value. This should have read 1.2-1.44 times.

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