Shares in Pacific Brands for sale

By PAM GRAHAM

The Pacific Brands share sale opens to retail investors today with demand expected to exceed supply.

Already, firm allocations to syndicated brokers were for less than the amount applied for.

About 500 million shares are being sold in Australia and New Zealand at between A$2.25 and A$2.60 a share.

Those seeking shares in the public pool pay A$2.60, or NZ$2.95, a share, and get a refund if the final price is below that. Retail applications are likely to be scaled back.

"The key is pricing, but one would think there will be interest locally," said Nat Vallabh of AMP Henderson.

The sale is a relaunch by private equity firms CVC Asia Pacific and Catalyst of businesses bought from Australian company Pacific Dunlop three years ago.

Under private equity ownership there was investment in the 50 brands, which include Bonds, Berlei, Jockey, Stubbies, Sleepmaker and Slazenger, and in management.

The businesses get about 10 per cent of their revenue from New Zealand, so a shareholder base is being sought in this country.

The plus of the float is that the brands are well known, the management team well regarded and the company has strong cashflows.

The drawbacks are that much of the asset base is brands, or intangible assets, and investors are being asked to pay a lot, compared with the amount the businesses sold for three years ago.

"It's not a steal but it is not overpriced," said Tim Preston of ASB Securities.

Andrew Bascand from Alliance Capital said the nub of the question was what value investors put on brands.

"I think this is an extremely well-run brand company but the bottom line is what do you pay for brands."

The float is similar to Promina's share sale last May in that New Zealand shareholders are getting a slice of an Australasian offer. It is similar to the Freightways float in that the vendors are private equity companies. Both were successful floats.

The lead managers are Macquarie and UBS and ABN Amro Craigs and First NZ Capital are co-managers in New Zealand.

Institutions and brokerage advisers were briefed about the businesses on Friday.