Feltex to join top 50 on stock exchange

By PAM GRAHAM

The stock exchange will get a new top 50 company with the listing of Feltex Carpets in May.

The carpet maker yesterday confirmed plans for the share sale and listing that will raise $40 million of new money and allow private equity owner Credit Suisse First Boston Asian Merchant Partners to exit.

The float could raise between $200 million and $250 million.

Its size has yet to be finalised, but shares will be sold in Australia and New Zealand. There will be a public pool and an exchange offer to bondholders.

Existing bondholders will be able to buy shares at a 5 per cent discount.

Bondholders not taking up the exchange offer are likely to be bought out, as Feltex said it would exercise a call option under the bond's deed.

A final decision on whether to proceed with the offer will be subject to market conditions.

The offer is lead-managed by First NZ Capital and Forsyth Barr.

Private equity firms typically buy companies cheap, turn them around and exit within five years.

Though there is some cynicism about the profit they make in relatively short timeframes, recent floats such as Freightways have been successful.

Investors would be able to compare the figures in the Feltex float to the already-listed carpet maker Cavalier Corporation, said Arthur Lim of Macquarie Equities.

Analysts reports have share price to earnings ratios of around 15 for Cavalier.

Initial public offers are typically priced below that, so the amount of discount will be a reference point.

Cavalier has relatively low debt but Feltex has diversity in that it sells more carpet in the commercial building market.

Lim said that though the building cycle seemed to be at its peak, the commercial building market had a better outlook than the residential.

That said, both companies would benefit from refitting houses after the floods in the lower North Island.

Feltex has a sizeable business in Australia but is being floated in New Zealand because its brand is best known here.