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Tegel shares to sell at lower end

NZN 19/04/2016 Paul McBeth

Tegel Group Holdings, the poultry group controlled by private equity firm Affinity Equity Partners, will sell shares at $1.55 apiece in the year's first initial public offering, near the bottom of its indicative price range.

The price was set in a bookbuild held on Monday and Tuesday, and was oversubscribed with interest from New Zealand, Australia and international investors, a spokeswoman says.

Priority was given to long-term, high-quality investors to ensure the quality of share register, she said.

She couldn't immediately say how much money would be raised in the IPO.

Auckland-based Tegel had planned to sell between 137.5 million and 192.4 million shares at $1.50-to-$2.50 apiece, its product disclosure statement said.

It would raise between $299 million and $344.4m, of which $131.9m will be set aside to repay bank debt and between $129.6m and $163m will pay out existing holders of Tegel's redeemable shares.

The remaining $22.5m to $25.3m will cover IPO costs, including an $8m bonus for senior management.

Tegel forecasts a profit of $10m on sales of $581.1m in the year ending April 24, rising to a profit of $44m on revenue of $637m the following year, when it intends to pay a dividend of between 7 and 11 cents per share.

That implies a gross dividend yield of 6.2 per cent to 7.1 per cent.

Affinity intends to reduce its 87 per cent stake to 45 per cent after the offer, at least half of which will remain tied up in escrow arrangements until it announces its 2017 results.

Tegel will be the first IPO of the year after a sluggish 2015, which saw a number of sales deferred in turbulent financial markets.

While private equity owners have attracted scepticism after the failure of consumer electronics store Dick Smith Holdings, investors have been more optimistic about the potential fortunes for Tegel.

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