KEY POINTS:
The cancellation of this year's biggest initial public offering is sensible, given the pounding the sharemarket has taken, say experts.
Murray Gribben, managing director of AMP Capital Investors, said the market downturn was the main reason for deferring the IPO of 80 per cent of its retirement village
business Summerset Group. The market had not been prepared to pay a high enough price for it to proceed.
AMP was expected to raise about $300 million with Summerset, which owns a large chain of North Island villages.
Ricky Ward, domestic equities manager at Tyndall Investment Management, said Gribben had taken the right step.
"It's probably prudent on their part because the markets are incredible volatile and we are in uncertain times."
He added: "Normally, with any IPO, the price is subject to there being no major market fluctuations but now we have a lot of uncertainty, so most people have to be more realistic about prices."
Simon Botherway, of Brook Asset Management, said the Summerset deal had a "quality management team" but had been ruined by the state of the markets.
"It had attractive underlying industry fundamentals. Currently we're in an environment of significant volatility and uncertainty in markets. We're unlikely to see any new floats proceeding right now."
Gribben blamed further falls in global and domestic financial markets.
He also cited Wednesday's trading when the NZX-50 index fell another 1.5 per cent, while the Australian S&P200 index fell 3 per cent.
The market has now plunged over 8 per cent in just over three weeks.
But Gribben said AMP was still pleased with its Summerset purchase, made just over a year ago.
"Summerset is a quality business which AMP Capital Investors is very pleased to own. We believe that its inherent value exceeds what the market would be prepared to pay in the current volatile conditions. We are not willing to accept a lower price for the asset and are under no pressure to sell."
A major fund manager said AMP had wanted far too much for Summerset, seeking about $1.70 each for the 200 million shares which many people thought were worth only $1.20 to $1.50.
AMP's fees to manage the business were also far too high and AMP was simply being too greedy at a time when the markets were sending out the opposite signals. AMP had only owned the business for a short time and yet wanted a big premium, the fund manager said.
ING Real Living, which owns two retirement villages, also plans to list and aims to raise $100 million.
Real Living general manager Nick Wevers said the Summerset decision could help his float.
"This means there's more money around and gives us a better run at the market, without the confusion of two floats. It clears the way and our offer is fairly priced with good fees."
He could not say when ING's prospectus would be registered or give any timeline for the float, but some fund managers predicted ING would kill its IPO.
ING is far smaller than Summerset: it has just two villages, both in Auckland, compared with Summerset's 11 spread throughout the North Island.