Tegel IPO at $1.55 a share, near bottom of the range

Tegal had forecast profit of $10 million and sales of $581 million in its prospectus. The company's financial year ended nine days before its listing. Photo / NZME

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, 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, said a spokeswoman for the company. 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 planned to sell between 137.5 million and 192.4 million shares at $1.55-to-$2.50 apiece, its product disclosure statement said. The gross proceeds of the IPO would raise between $299.1 million and $344.4 million, of which $131.9 million will be set aside to repay bank debt and between $129.6 million and $163 million will pay out existing holders of Tegel's redeemable shares.

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

Tegel forecasts a profit of $10 million on sales of $581.1 million in the year ending April 24, rising to a profit of $44 million on revenue of $637 million 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 percent to 7.1 percent.

Affinity intends to reduce its 87 percent stake to 45 percent after the offer, at least half of which will remain tied up in escrow arrangements until it announces its 2017 results. The private equity firm will be allowed to sell up to 50 percent of its remaining stake before then if Tegel's shares spend 10 straight trading days at least 20 percent higher than the offer price, once the first-half results are posted.

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.