Crest Nicholson (CRST), the housebuilder taken private six years ago is returning to the market through what will be the biggest initial public offering so far this year. Around 40 per cent of the group will be up for grabs, and the price was set at 220p a share, valuing the whole group at around £553m, still some way below the £715m paid by the original purchasers HBOS and entrepreneur Sir Tom Hunter in March 2007. Of the £225m raised, around £169m will go to existing stakeholders Deutsche Bank and US investment group Varde Investment Partners, while the balance will be used to pay down debt.
Conditional dealings started on 13 February, and the shares immediately attracted a hefty premium to the offer price, jumping over 20 per cent to 265p. Official dealings started this morning, and the group is well placed to benefit from the current favourable conditions for housebuilders, with around 95 per cent of its 16,959-plot short-term land bank focused on the more prosperous south of England. There are a further 12,623 plots in the strategic land bank, and total land holdings have an estimated gross development value of £6.8bn. Total completions last year rose 24 per cent from a year earlier to 1,882, and average selling prices were up from £224,000 to £230,000.
The success of the offering may encourage other housebuilders back into the market, the most obvious candidate being McCarthy & Stone. Late last year the group hired an investment bank to prepare for a potential flotation some time this year.
The specialist builder of retirement flats was sold in 2006 to a consortium that included Scottish entrepreneur Sir Tom Hunter and property investor brothers David and Simon Reuben. The sale, which saw the housebuilder fetch £1.1bn – 150 per cent of its net asset value – proved to be a master stroke in timing because, soon after, the market became so tough following the credit crunch that the original purchasers lost virtually all their money and a debt-for-equity swap in 2009 left Lloyds Bank with a 25 per cent stake. Last year, McCarthy delivered its strongest performance since 2007, with annual sales up 12 per cent at £257.7m and cash profits up 10 per cent from a year earlier at £39.9m.
