Prospective investors in law firm HWL Ebsworth, which will be renamed Alarcon when listed, are understood to have been deterred from participating in the prospective float of the business due to the fact that it plans to list with a $232.5m net debt pile.
The company told fund managers investors on Tuesday that it had scaled back the size of its initial public offering to $151m from earlier ambitions of raising between $232m and $255m.
It also locked in the price at $2.30 per share.
HWL Ebsworth is a full-service Australian corporate law firm that is a significant player in
the local legal services market, providing legal services to corporate and government clients.
The law firm is moving to a public company structure from a partnership model and started its management roadshow last week.
Its raising will consist of a $20m primary selldown and a $131.4m secondary selldown by existing investors.
The company’s market value will now be $407.4m and new shareholders will own 37.1 per cent of the business compared to the 49.5 per cent originally planned.
Earlier, the law firm was expected to have a market value of between $471m and $519m.
Working on the float is Macquarie Capital and Bell Potter.
Market sources say that they side stepped the deal due to concerns about the company starting life with $232.5m of net debt, which they suspected would be used to pay partners a pre—IPO dividend.
They also expressed caution about little clarity around the old and new models of partner remuneration and they lacked conviction about the strength of the firm’s management.
The book build opened on Monday and the prospectus was due to be lodged Tuesday.
Shares are expected to start trading on December 16.
The pricing equates to 8 times the group’s forecasted earnings before interest, tax, depreciation and amortisation on an enterprise value basis and 11 times its forecasted net profit.
Shareholders will receive a dividend yield of 6.8 per cent.
Including debt, the company will be worth $640m.
Meanwhile, float prospect Fantastic Furniture is hoping to list at 11 times its net profit, taking its market value to between $430m and $530m.
It is understood that the terms are yet to be finalised, but the pricing is due to be set this week at around those numbers.
Its net profit for fiscal 2021 is expected to be $47.6m, up from $38.5m for the 2020 financial year.
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