Cut-price Clydesdale sale
Cut-price stock market flotation plans could lead way for business to be taken over
NATIONAL Australia Bank has unveiled plans for a cut-price stock market flotation of Clydesdale Bank, which a prominent investment manager said could pave the way for the takeover of the business.
The Australian group said it will proceed next month with a flotation which could value Clydesdale at £1.5 billion. This would represent only around half the £2.7bn book value the bank had at 30 September.
The group hopes the flotation will put a valuation of up to £2bn on Clydesdale, or 76 per cent of the book value.
The exercise comes after market talk in August that NAB would seek a £2.5bn valuation of Clydesdale, which employs about 4,000 people in Scotland.
NAB’s chief financial officer Craig Drummond said yesterday the company had cut the expected valuation of Clydesdale in response to the volatility seen on global stock markets amid concern about the prospects for the global economy.
“There’s no question, it’s a little lower … for the obvious reason that markets are volatile and a bit soft,” he told Australia’s Fairfax Media.
Justin Urquhart-Stewart, of Seven Investment Management, said: “I’m very surprised they’re going ahead with it.” NAB appeared to have accepted a significant cut in the valuation of Clydesdale.
It plans to sell 25 per cent of the shares to institutional investors such as pension funds through an initial public offering. It expects the IPO to value Clydesdale at £1.54bn to £2.07bn.
Mr Urquhart-Stewart believes NAB should have completed the IPO in smaller stages, so that it could get a higher price for future tranches of shares if stock market sentiment improves.
But he said NAB’s directors were probably confident it could complete the IPO, even if only at the bottom of the price range. NAB has met more than 300 institutions in recent months.
There could be strong interest in Clydesdale Bank, which is being demerged along with NAB’s Yorkshire Bank as CYBG.
Mr Urquhart-Stewart noted NAB had spent lots of time and money preparing Clydesdale for disposal. As a challenger bank with a brand and a cleaned up balance sheet Clydesdale could form an attractive target for a firm that wanted to enter the UK market.
Private shareholders will not be offered shares in the IPO. They will be able to buy shares on stock markets once trading in the securities starts.
Shareholders in NAB will be allotted 75 per cent of the shares, which they could sell in the market. NAB said it may elect not to proceed with the IPO or to complete only a partial IPO. But Mr Drummond emphasised it planned to go ahead with the deal. On Saturday NAB’s chairman Ken Henry said: “It will be very, very important to get this behind us. The UK story has been quite distracting.”
Clydesdale’s chief executive David Duffy believes it can challenge the dominance of the UK’s big players.
Mr Duffy, who took charge in June, has said Clydesdale could in time act as a consolidator in the challenger bank market. It has set ambitious targets to grow its retail business and SME lending.
NAB has set the price range for the IPO at between 175p and 235p per CYBG share.
The issue price will be announced on February 2 based on the response to the IPO.
Trading in the shares will start on February 2 on the London Stock Exchange and on the Australian Securities Exchange the next day. NAB bought Clydesdale for £420 million in 1987. It acquired Yorkshire Bank for about £900m in 1990.
‘‘ There’s no question, it’s a little lower … for the obvious reason that markets are volatile and a bit soft