PartyGaming flotation 'fully subscribed'

THE initial public offering for PartyGaming, the world's biggest online poker company, has been fully subscribed, the bank running the listing said last night, insisting that it had 'no plans' to cut the price.

Dresdner Kleinwort Wasserstein said it was sticking to its price spectrum of 111p-127p, despite City bookmakers suggesting that the shares may have to be discounted below the bottom of that range.

Cantor Index was yesterday quoting 109p-114p but will settle its grey market in PartyGaming at the closing share price on July 1.?

If pricing is agreed at between 111p-127p, PartyGaming will raise between £996m-£1.139bn and value it at between £4.4bn-£5.1bn, making it the biggest online company to float since Dimension Data in 2000. It should automatically gain entry to the FTSE 100 index. Trading is expected to start next Monday.

Adrian Darley at Gartmore Investment Management believes PartyGaming should be seen as a normal business, despite its 'dotcom' connotations. He said: 'PartyGaming is profitable and offers a significant dividend yield. Despite being involved in internet it is a normal business. There are risks attached which will make it incredibly attractive to some investors and put more conservative fund managers off the stock.'

Getting the PartyGaming flotation away will be a feather in the cap for Deutsche Kleinwort Wasserstein, which is leading a group of underwriting banks - Bayerische Hypo-und Vereinsbank, Calyon, Commerzbank, Enskilda Securities, ING and Mediobanca-Banca di Credito Finanziario.

Last week it emerged that DKW and the seven other European banks handling the float could scoop an estimated £54m in fees. The float has been boycotted by American investment banks on the grounds that internet gambling is illegal in the US

The selling shareholders - the company is raising no new money through the flotation - have agreed an underwriting scale that gives the banks a higher fee the better they do with the issue. The main sellers are founders Anurag Dikshit and Ruth Parasol, her husband Russ DeLeon and marketing director Vikrant Bhargava. Others are Nitin Jain and Bonita Ventures.

The underwriting banks will receive 2.5% basic commission but can earn a further 'non-discretionary incentive fee' of up to 0.8% if certain 'criteria as to valuation, timing and after-market performance' are met. There is also a 'discretionary incentive fee' of 0.5% that can be paid by the sellers if they so decide.

That takes the potential maximum underwriting fee up to 3.8% of the issue. With a minimum of 782m shares being offered, the underwriters should make £37.7m if they hit the top end of their targets. They would pick a further £5.6m if the whole of the over-allotment option of 115m shares is also successfully got away.