William Hill, Britain's second largest bookmaker, yesterday brushed aside jitters in the new issues market as its shares rose nearly 10 per cent on their first day of conditional trading.
Seen by many investors as a relatively safe, cash-generative business with an attractive dividend yield, William Hill's offering was more than 10 times subscribed.
The shares, which were issued at the high end of expectations at 225p sterling, closed 21½p higher at 246½p, giving the group a market value of £1.04 billion sterling (€1.6 billion).
William Hill, which has more than 1,500 shops and also offers telephone and online betting, plans to use the £340 million of new money it raised to cut debt and buy up small, independent outlets among Britain's 8,500 betting shops. The rest of the cash raised will be used to pay private equity owners Cinven and CVC Capital Partners, and William Hill's shareholding directors, managers and employees.
Investors drew comfort from the solid debut but warned that it was not representative of the new issues market as a whole.
"The market for initial public offerings looks a bit healthier now, but one should not forget that there were factors that were specific to William Hill," said one fund manager. Analysts said attractive pricing was a key part of William Hill's success.
At 225p, the firm's shares were priced at 12.4 times forecast earnings for this year - a 29 per cent discount to the British leisure sector and 48 per cent discount to the FTSE-All Share Index.
But they also cited strong fundamental reasons to buy the shares, such as the continuing deregulation of the British betting industry and the surge in internet betting.
And England's progress to the quarter finals of the soccer World Cup in Japan and South Korea has been an added boost.
Britain's biggest betting shop chain Ladbrokes, owned by Hilton Group, has forecast the World Cup will attract £200 million sterling of bets in Britain, more than twice that seen in the previous tournament.
To meet the extra demand for shares, William Hill's owners Cinven and CVC sold down a larger-than-expected proportion of their stakes.
The two now hold only 27 per cent of the shares, compared with 90 per cent before the float and their initial target of 44 per cent. This stake will fall to just 18 per cent if an over-allotment option is exercised in full.
A 10 per cent stake held by William Hill's directors, managers and employees is now down to 4 per cent, although chairman Mr John Brown will not be selling any shares, making a total free float of around 69 per cent.
Schroder Salomon Smith Barney is acting as global co-ordinator of the offer as well as joint bookrunner with Deutsche Bank, while ABN Amro, Rothschild and Cazenove are co-lead managers of the offer.
