Gartmore Plans IPO, Would Cut Hellman Stake in Half

LONDON (Reuters) – Private equity-owned fund manager Gartmore plans to list in London in a move which could kick-off a much-touted run of initial public offerings among companies owned by cash-hungry buyout firms.

Gartmore, which was bought out by management in 2006 backed by U.S. firm Hellman & Friedman, will list an about 30-50 percent stake to raise 500 million to 550 million pounds ($833.1 million to $916.4 million) in the country’s biggest IPO this year, people familiar with the matter said.

Hellman & Friedman’s stake will fall below a majority position from about 52 percent at present, a company spokeswoman said, although she declined to give further details.

The listing — which is expected by year-end and would value Gartmore at about 1 billion pounds — would represent the first private equity IPO in the UK since 2007, according to data from the Centre for Management Buyout Research.

Gartmore employees, who own the remainder of the company, are also poised for a payday as staff are expected to sell around 20 percent of their overall holdings. The balance of the directors’ and employees’ shares are subject to staggered lock-in arrangements that expire in 2013.

The firm will use the proceeds from the listing to pay down the debt taken on for the MBO and added to in a refinancing the following year. Net debt of some 400 million pounds at end-September 2009 will be cut to 150 million pounds, the company said. The debt does not come due until 2014.

HELLMAN STAYS ON BOARD

Gartmore CEO Jeff Meyer said in a conference call that Hellman & Friedman would keep its two representatives on the board after the flotation.

The company had considered an IPO in 2007 for up to 1.5 billion pounds. These plans were put on ice due to the financial crisis and in April, a senior Gartmore executive played down the likelihood of an IPO because of the state of the markets.

However, the recent surge in equity prices has reignited interest amongst private equity firms to list portfolio businesses.

Private equity investors are showing signs they are ready to accept lower returns in exchange for getting some cash back when portfolio firms come to float in what could be a crowded market for new issues over the next year. [ID:nLH729548]

“We are a conservative firm, a firm which does not need leverage other than for the purpose of the buy-out and we thought it was an opportune time to de-lever,” Meyer said.

Meyer said that although the IPO timetable was “not cast in stone”, he expects it to go ahead by mid-December.

As at end-September Gartmore and its subsidiaries had 21.8 billion pounds of assets under management and had attracted 924 million pounds of net inflows in the third quarter of 2009.

BofA Merrill Lynch, Morgan Stanley (MS.N) and UBS (UBSN.VX) Investment Bank are acting as joint global co-ordinators, joint bookrunners and joint sponsors in the IPO. Citi (C.N) is acting as joint bookrunner and Fox-Pitt, Kelton is acting as co-lead Manager. ($1=.6002 Pound) (Reporting by Cecilia Valente and Daisy Ku, Editing by Joel Dimmock)