Feast of flotations could lead to famine for fund-seekers

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A revival in stock market flotations may be slowed by government asset sales and demand for equity by banks that could make it difficult for a growing clutch of newcomers to attract investors, companies fear.


Lloyds Banking Group will today launch the spin-off of its 631-branch TSB, to be listed next year, and ministers are expected to approve the £3bn flotation of Royal Mail this week. The Government is also edging closer to selling £5bn of its £20bn Lloyds stake.

Tougher post-crisis financing regulations also mean that banks are forming a queue to strengthen balance sheets. Barclays is leading the way and will launch its £5.8bn rights issue on Friday.

At the same time, more companies are considering initial public offerings. Merlin Entertainments, owner of Madame Tussauds and Legoland, is looking to list before Christmas with a £3bn valuation, and plans to sell 10pc of its stock to retail investors.

Zoopla, the second biggest online estate agent, could be valued at £1bn and has appointed Credit Suisse to advise it on "further strategic opportunities".

Others are already in train. Foxtons, the private equity-owned London estate agent, is due to start a road show this week in the run-up to its flotation. DFS, the discount furniture chain, has been mulling over a return to the market, along with House of Fraser, once the owner of Harrods.

The queue of potential candidates also includes EE, the mobile phone market leader, Saga, Card Factory and Appliances On-line, all encouraged by the growing signs of economic recovery.

Some owners reviewing flotation prospects have been considering advancing listing timetables because of what they see as uncertainties caused by the imminent glut of equity issuance.

Merlin had to abandon a listing planned for 2010 because of market volatility and is worried its placing could be derailed again if it ends up against Royal Mail.

However, investment bankers say there is enough confidence and capacity for the market to accommodate the deals.

Advisers are gearing up for an increase in business. Lawyers are reporting a healthy growth in appointments, while Ian Powell, UK chairman of PwC, said he was anticipating more deals.