Initial public offerings are increasingly using cornerstone processes and front-end bookbuilds as owners become risk-averse.
In the past six months, most IPO prospects were already priced by the time the bookbuild occurred, with enough investor demand locked away before they lodged their prospectus.
Peter Warren Automotive is the latest case of a front-end structure where the price is determined before the raising unfolds.
On Monday it locked in $200m from institutional cornerstone investors in a deal advised by Jarden Australia, Jefferies and Morgan Stanley.
The company will raise $260m with shares at $2.90, taking its market value to $483m.
The price equates to 15 times estimated net profit for 2021.
Owner Quadrant Private Equity will sell down to a 9.4 per cent shareholding.
This was less than some expected, given the Warren family owners opted not to include so much of the real estate in the float.
Some believed Peter Warren would list closer to $550m with industry heavyweight AP Eagers a comparable company.
The Warren family will buy a further $15m in the offer and will own 35.1 per cent of the company once listed, with the remaining $45m on offer to other institutional investors.
The privately owned dealership group has been operating in Australia for more than 60 years and has 70 franchise operations.
Peter Warren, Frizelle Sunshine Automotive, Sydney North Short Automotive, Mercedes-Benz North Shore, Macarthur Automotive and Euro Collision are part of its chain.
Other shareholders include the Frizelle Family, Bernard Friend and Mark Weaver.
The company’s prospectus will be lodged on April 6 and Peter Warren is expected to start trading on a deferred settlement basis on April 27.
Latitude Financial and Liberty Financial are also embarking on front-end bookbuilds.
Liberty locked in enough support to raise $321m last year at $6 per share after institutional investors took cornerstone stakes.
Latitude priced its float this month after locking in support from four key institutional investors that provided $120m in a deal brokered through Insight Capital Advisers.
“Vendors don’t want the risk and it is better than the deal being pulled,” said one market expert.
Flower wholesaler Lynch also embarked on a cornerstone process in recent weeks, but had to reprice its IPO due to lacklustre demand from retail investors.
The business is listing with a $439.6m market value and raising $206m.
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