CORRECTED-UPDATE 2-UK retailer Poundland's share price jumps in market debut

Wed Mar 12, 2014 1:40pm GMT

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(Corrects price range in third paragraph from 625-750 pence)

* Poundland shares list at 300 pence, rise up to 33 pct

* Pets at Home shares list at 245, rise up to 4.6 pct

By Freya Berry and James Davey

LONDON, March 12 (Reuters) - Shares in discount retailer Poundland made a strong debut on the London Stock Exchange on Wednesday, with the price jumping 33 percent to nearly four times the one-pound price tag it puts on all its merchandise, valuing the business at 998 million pounds ($1.7 billion).

Shares in the company, one of several British retailers looking to list in London this year and capitalise on the country's gradually improving economy, were trading at 396.6 pence at 1243 GMT, well above the 300 pence flotation price which had valued the firm at 750 million pounds.

Last month Poundland had set the price range for the share offer at 250-300 pence to value the company at 625-750 million pounds.

Private equity firm Warburg Pincus reduced its 76 percent stake in the operator of over 500 stores, which sells items for 1 pound, to 37.9 percent, or 30.4 percent if an over-allotment is exercised.

Some 50 percent of the firm's equity will be freely tradable.

Poundland's management led by Chief Executive Jim McCarthy, a 30-year veteran of the retail sector, reduced their holdings from about 24 percent to 10.2 percent.

Poundland, the first British discount retailer to seek a public listing, did not issue any new shares to investors in the offer, which raised gross proceeds of 375 million pounds.

A source familiar with the matter said the offer was covered over 15 times and that Warburg Pincus, which bought Poundland for 200 million pounds in 2010, saw an internal rate of return (IRR) of over 50 percent, and a money multiple of 4.5 times on the flotation.

PETS AT HOME

Separately on Wednesday Britain's biggest pet shop group Pets at Home priced its share offer at 245 pence, giving a debut market capitalisation of 1.225 billion pounds.

Its shares hit a high of 256.25 pence, up 4.6 percent.

The firm, which had set a price range of 210-260 pence last month, is raising 280 million pounds, with major shareholder KKR , the U.S. private equity group, other shareholders and members of the management team receiving 210 million pounds.

Following the listing KKR will hold 46.2 percent of the equity, while management led by Chief Executive Nick Wood will hold 4.3 percent. Some 40 percent of its issued share capital would be freely tradable

Wednesday's flotations follow last month's listing in London of AO World, the online domestic appliances retailer, which saw a surge in its share price above its offer level on debut.

Several other British retailers are seeking listings as consumer confidence improves, including Fat Face, B&M and House of Fraser expected to come to market.

JP Morgan and Credit Suisse were bookrunners on the Poundland sale, while Bank of America Merrill Lynch, Goldman Sachs and KKR Capital Markets led the Pets at Home offer. ($1=0.6014 British Pounds) (Editing by Mark Potter and Greg Mahlich)

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