* To raise up to 550 million stg in Dec IPO-sources
* Hellman & Friedman will no longer be majority investor
* Will use 250 million stg to cut net debt
* Offering to value firm at about 1 bln sterling
(Add valuation comparisons, details)
By Cecilia Valente and Daisy Ku
LONDON, Nov 20 Private equity-owned fund manager
Gartmore has kicked-off a much-touted run of initial public
offerings among companies owned by cash-hungry buyout firms, in
a deal valuing it at about 1 billion pounds ($1.7 billion).
Gartmore and San Francisco-headquartered Hellman & Friedman,
which backed a management buyout in 2006 that valued the firm at
550 million pounds, will raise as much as that amount in the
first private equity IPO in Europe this year, and the first in
the UK since 2007, according to data from the Centre for
Management Buyout Research.
Gartmore plans to raise 250 million to 300 million pounds in
new shares to cut net debt to about 150 million pounds, while
private equity firm H&F and Gartmore employees could sell as
much as 250 million pounds worth of existing shares, depending
on investor demand, people familiar with the matter said.
Gartmore is looking for a free float of between 30 to 50
percent after a planned listing around Dec. 11, the people said.
H&F's stake will fall below a majority position from about
52 percent at present, a company spokeswoman said, although she
declined to give further details.
Gartmore employees, who own the remainder of the company,
are also poised for a payday as staff aim to sell around 20
percent of their overall holdings. The balance of the directors'
and employees' shares are subject to staggered lock-in
arrangements that expire in 2013.
Gartmore and bookrunners BofA Merrill Lynch (BAC.N), Morgan
Stanley (MS.N) and UBS UBSN.VX are to set the terms of the IPO
around the end of the month after testing investor appetite in a
pre-marketing process started Friday.
Gartmore's funds under management were 21.8 billion pounds
at the end of September, up 34 percent since February 2009 but
still below the level of about 25 billion pounds in 2006.
The company had considered an IPO in 2007, which valued it
at 1.5 billion pounds, but the plan was put on ice due to the
financial crisis and in April, a senior Gartmore executive
played down the likelihood of an IPO because of the state of the
However, the recent surge in equity prices has reignited
interest amongst private equity firms to list portfolio
At 1 billion pounds, Gartmore is valued at 4.6 percent of
assets under management, above the 1 percent level at which
Aberdeen Asset Management (ADN.L) is valued and 1.5 percent at
Henderson Group (HGGH.L).
But Gartmore has 17 percent of its fund under management as
hedge funds, which generate higher fees than traditional funds.
Gartmore CEO Jeff Meyer said in a conference call that H&F
would keep its two representatives on the board after the
Private equity investors are showing signs they are ready to
accept lower returns in exchange for getting some cash back when
portfolio firms come to float in what could be a crowded market
for new issues over the next year.
"We are a conservative firm, a firm which does not need
leverage other than for the purpose of the buy-out and we
thought it was an opportune time to de-lever," Meyer said.
Meyer said that although the IPO timetable was "not cast in
stone", he expects it to go ahead by mid-December.
Gartmore generated 38.1 million pounds operating earnings on
the back of 207.1 million pounds for the first nine months in
The firm will use the proceeds from the listing to pay down
the debt taken on for the MBO and added to in a refinancing the
following year. Net debt of some 400 million pounds at
end-September 2009 will be cut to 150 million pounds, the
company said. The debt does not come due until 2014.
Citi is acting as joint bookrunner and Fox-Pitt, Kelton is
acting as co-lead Manager for the deal.
(Editing by Joel Dimmock and Jon Loades-Carter)