Intertek sets test for struggling IPOs

THE parlous state of the initial public offerings market is expected to be evident again when product testing group Intertek sets its flotation price at the bottom end of its indicative range. City sources say the shares are expected to be priced between 400p and 415p compared with a range of 400p to 490p published only a fortnight ago.

Sentiment in the IPO market has since returned to the depressed note of early this year, although sources close to the Intertek listing believe the lower price will ensure the float does not have to be delayed. The initial range was set in the light of the poor market debut of music group HMV and the heavily revised listing price for Punch Taverns.

A price of 400p would put the stock on a prospective earnings multiple of about 15 times based on analysts' forecasts of after-tax earnings of £40m for the current year. This compares with an average of 18 to 19 times for the support services sector in which Intertek will be classed. A price of 410p would value Intertek at £594m.

The company was the subject of a £380m management buyout, backed by Charterhouse Development Capital, from Inchcape in 1996. Intertek, which tests products ranging from oils and chemicals to refrigerators and toys, hopes to raise £245m in fresh equity as part of the float to halve its debt.