UK - Gartmore cuts IPO share price to 220 pence

The offer, which values the company at £676m, was said to have been cut as a result of a lack of interest from institutional investors. It is hoped that a drop in price would mean longer-term UK, US and European investors would purchase shares, as opposed to only hedge funds.

Hellman & Friedman and Gartmore's management are understood to have sold half the number of shares they originally planned to sell. However, the IPO still values the company at more than 10 times its 2010 earnings and is thought to be an achievement given the backdrop of the Dubai debt crisis.

Hellman, which held a 58% stake in Gartmore, has reduced its holding to just under 30%, while Roger Guy, one of the top fund managers at the company who held a 13% stake, has reportedly sold approximately 6.5 million shares, generating more than £10m.

Gartmore will raise approximately £300m of proceeds from the offering in total, which the company plans to use to pay down its net debt from £400m to about £135m.

In 2006, Hellman backed the management buyout of Gartmore in a £550m deal. The transaction followed seven months of negotiations after the vendor, Nationwide Mutual Insurance Company, appointed Morgan Stanley to conduct a review in October 2005. Nationwide cited strained relations between US and UK management as the reason for the sale, in which it retained the US division of Gartmore with Hellman taking the UK, European, Japanese and Latin American divisions.

The Gartmore senior fund management and executive team acquired a significant minority stake as a result of the deal. Goldman Sachs and HSBC provided the debt on the transaction.

Gartmore's cut in its IPO share price could have implications for other planned listings in the coming year, as many private equity firms could have overinflated expectations about the value of their portfolio companies. Blackstone and DIC's Merlin Entertainment is due to float next year, as is Virgin Active, backed by Permira and Bridgepoint and Apax's fashion retailer New Look.

UBS, Morgan Stanley and Bank of America Merrill Lynch worked on the IPO. Gartmore's share price opened at 220 pence in early morning trading today, quickly dropping to 210 pence before recovering in mid-morning.

Gartmore was established in 1969 by British & Commonwealth and entered the UK pensions market in 1979. The fund management group is a provider of specialist active investment products in retail, institutional and alterative markets with $40bn of assets under management. It offers an array of high alpha and absolute return products to investors.

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