Clydesdale IPO nets NAB up to $805m
NAB finalises pricing for Clydesdale spin-off at nearly $1bn less than the upper range of market cap hopes.
National Australia Bank has finalised the pricing for the spin-off of its struggling British subsidiary Clydesdale at nearly $1 billion less than the upper range of the market capitalisation hoped for by the company.
NAB shares started trading on an ex-CYBG security-basis this morning. In early trade, NAB shares dived 3.8 per cent to $26.85 as investors adjusted for the lost earnings from the Clydesdale exit.
NAB today said the final offer price for the Clydesdale and Yorkshire Banking Group is £1.80 per share, giving the demerged bank a market cap of £1.583 billion ($3.221bn).
Financial market volatility pushed NAB to narrow the price range for its spin-off to between £1.75 and £1.85 a share, after wild market ructions saw investor appetite diminish for the bank’s hopes of up to £2.35 a share.
“We are pleased with the response from institutional investors to the IPO, including from NAB shareholders, despite the recent significant market volatility,” NAB chef executive Andrew Thorburn said.
“The successful conclusion of the demerger and IPO of CYBG is a significant milestone for NAB that will enable us to pursue our own focused strategy in our core markets in Australia and New Zealand,” he said.
NAB will see gross proceeds of $805m if the over-allotment option is exercised in full, and $700m if it is not exercised at all.
The completed demerger came alongside a warning from Deutsche analyst Andrew Triggs, who said the spin-off would likely see NAB trim its generous dividend amid a decline in the bank’s forecast profit.
Mr Triggs said without the UK business, NAB’s outlook seemed “challenging” and the current dividend was “unsustainable”.
He estimated NAB’s net profit after tax would be between 4 and 5 per cent lower, while the dividend would reduce between 6 and 7 per cent.
“Although we see a number of different outcomes on dividends, we have assumed that NAB re-bases its dividend lower, with a payout ratio around the midpoint of the 70 to 75 per cent target range,” Mr Triggs said.
CYBG is expected to commence trading on the London exchange at the market open today, following a last-minute delaying of the float yesterday. Locally-listed CYBG shares will start trading on the ASX tomorrow.
Following the divestment of the bank’s US arm, Great Western Bank, the offloading of its life insurance business to Japanese firm Nippon Life for $2.4 billion, and a reduction in specialised group assets, the Clydesdale and Yorkshire arm was the last significant stand-alone businesses operating outside of the Australian and NZ markets.
The UK operations, which NAB bought into in 1987 with Clydesdale followed by Yorkshire in 1990, have been eating into the profitability of the Australian lender for years.
The complex Clydesdale demerger will give NAB’s existing shareholders around 75 per cent of the bank, with the option of shares in the London-listed entity or Chess Depositary Interests on the Australian Securities Exchange.
NAB paid £420 million for Clydesdale in 1987 and about £900m for the Yorkshire business in 1990.
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