Published: Thursday, 29 Oct 2009 | 1:05 AM ET

Text Size

Myer, Australia's largest department store chain, is set to price its initial public offer at A$4.10 each, near the lower end of an indicative range, as institutional investors baulked at the rich valuation.

Rick Rycroft / AP

Sources with direct knowledge of the offer told Reuters on Thursday that Myer was expected to settle for that price, after closing the institutional portion of the offer ahead of schedule.

Myer is being floated by its private equity owners, TPG Capital and Blum. Sources said the firms were still debating how much stake to retain in the company after the offer.

"I'm not aware that any decision has been reached on pricing," a Myer spokesman said.

Myer's IPO, the biggest Australian offer since the credit crisis hit, is seen as a litmus test for a flurry of other offers which are expected to come to market in the next few months.

The sources declined to be identified as the pricing details were not made public yet.

The IPO had been marketed in an indicative range of A$3.90-A$4.90 each. At A$4.10, the offer would raise A$1.97-A$2.05 billion ($1.69-$1.76 billion) depending on how many shares were finally issued.

"We think it's too expensive," said Richard Morris, investment manager at Constellation Capital Management, which decided not to buy shares in Myer.

"We're conscious of the fact that department stores have been losing market share for a number of years...and also the fact that Myer are changing their strategy in terms of the shoppers they target," he said, pointing to a move downmarket.

Other offer details were not immediately available.

TPG and Blum had planned to own between 0 and 13.5 percent of Myer after the listing.

Macquarie Capital, Goldman Sachs and Credit Suisse were joint lead managers to the offer.

TPG and Blum bought Myer for A$1.4 billion from Coles Group in 2006, and has spent more than A$370 million in updating logistics operations and renovating stores.

Myer has 65 stores across Australia, nearly double its upmarket rival David Jones 36 stores, and claims 3 million shoppers a week through its doors in a country of 21 million.

Print

Email

Text Size