Recent turmoil set to affect CBL price

CBL is aiming to raise up to $132 million, including $90 million of new capital. Photo / File

Heightened market volatility and wariness among institutional investors about new share offers is expected to put downward pressure on the final pricing of insurer CBL Corporation's stock exchange float.

The Auckland-based company this week registered a product disclosure statement for New Zealand's second IPO of the year. CBL is aiming to raise up to $132 million, including $90 million of new capital, and its shares are expected to begin trading on October 13 on the NZX and Australia's ASX.

The company, which offers residential builder warranties and construction bonds among its products, has set an indicative price range of $1.45 to $1.85 for its shares, which values the company at $324 million to $389 million.

Final pricing for the offer will be set through a bookbuild process with brokers and institutional investors on September 17.

"At the lower end of the range is definitely where [investors] are landing," said one market source, who didn't want to be named. "And there's a sense that these guys [CBL] really want to do the listing."

He said the recent market turmoil - driven by a Chinese sharemarket rout and fears about the outlook for global growth - would have an impact on CBL's final pricing.

The Australian newspaper reported fund managers were expected to lobby for the shares to be priced at the lower end of the range due to "choppy market conditions".

Rickey Ward, New Zealand equity manager at JBWere, said the poor performance of many recent sharemarket listings meant fund managers were "putting the ruler" over new offers more carefully than they might have in the past.

"You could have floated anything, effectively, a couple of years back," Ward said.

"Fund managers are scrutinising the underlying earnings, and multiples you pay for that, a hell of a lot more today than they ever have."

CBL managing director Peter Harris said on Monday that the volatile environment could have a small impact on the final pricing.

"But we're talking with investors who see well through this and are looking at the fundamentals and the track record of the company."

Existing shareholders are expected to retain a 60 to 63 per cent stake.