A flurry of firms announced plans yesterday to brave the recent turbulence in the stock market with initial public offerings – led by Britain’s largest care homes operator, Southern Cross Healthcare.
Southern Cross will be valued at about $550m when it joins the market at the end of the month. The others planning to list in London are Nationwide Accident Repair Services, an Asian online media group called Pixel Interactive Media, and a voice-over internet protocol firm, Citel.
Southern Cross has bulked up through a series of acquisitions in a fragmented marketplace. Despite being the industry leader, it has only 6% of the $11.7bn care home market, with 578 properties and almost 29,000 beds. It provides services for the elderly and long-term care for people with disabilities and for young people with behavioural problems. About 70% of its revenues come from local authorities and the NHS.
The current conditions for company flotation are far from ideal. World markets in May suffered their worst month for three-and-a-half years, driven chiefly by concerns over the economy in the United States. Ten days ago, two London floats were postponed because of the volatility: CMC Markets, a spread-betting and foreign-exchange firm, and Sigma Capital Investments, a property group.
One float that did get away was internet phone business Vonage, in New York, but its shares have since suffered a mauling. Philip Scott, Southern Cross’s chief executive, said he was undeterred. “We think our business is a very good story. We have very stable revenues and are a very predictable business for the medium term, so we don’t think that any market volatility materially affects our business.
“There is increasing UK demand for 24-hour care services to meet the needs of an ageing, dependent elderly population.”
The firm plans to raise about $275m in the float. US private equity group Blackstone will reduce its stake in the float from 88% to below 50%, while Southern Cross will issue shares to help repay debt and make funds available for expansion including acquisitions.
Southern Cross has bought companies including NHP and Ashbourne for a combined $1.2bn.
Nationwide Accident Repair is joining Aim and is expected to be valued at $50m-$55m. The Oxfordshire company operates 69 repair centres across Britain and provides services to motor insurers and fleet operators. Last year it had sales of $140m and operating profits of $4m.
Pixel Interactive was formed in 2002, in a management buyout of the Hong Kong media sales operation of DoubleClick. It provides online advertising services. It now has offices in Kuala Lumpur and Shanghai, and plans to list on Aim at the end of the month or early in July.
Citel develops voice-over internet products for the business telephony market. It is also joining Aim and plans to raise $10m.