C&C to Woo Investors with Attractive Dividend in Highly Anticipated IPO

Strategic Insights -

C&Cs launch of an initial public offering on May 19 is set to tempt investors with a generous dividend. The company, preparing to raise Euros 440m (Pounds 307m) ahead of expenses, has announced that its full-year dividend will be covered at least two times by earnings before amortisation of goodwill and intangible assets. This would result in a dividend yield of 5% at the midpoint of the indicative price range, put at Euros 2.26 to Euros 2.74, placing it in line with utilities and high-yield stocks.

Key Takeaways:

  • C&C will launch its IPO on May 19, seeking to raise Euros 440m (Pounds 307m) before expenses.
  • The company has guaranteed a full-year dividend that will be covered at least two times by earnings before amortisation of goodwill and intangible assets.
  • The indicative price range for the offer is Euros 2.26 to Euros 2.74, offering a potential 5% dividend yield at the midpoint.
  • The IPO proceeds will be used by BC Partners to reduce their stake in C&C from 90% to 37%.
  • The introduction of new investors will see 55% of the equity in free float, with management retaining 4.7% and employees receiving 2.6%.
  • C&C's debt has been significantly reduced, down from Euros 700m to Euros 480m, thanks to improved cash generation and the sale of its Italian aperitifs unit for Euros 150m.
  • The company has experienced growth in market share, despite lower cider sales overall, and is positioned to benefit from an increase in cider's share of the long drinks market in Ireland.

Statistics:

  • C&C expects to raise Euros 440m (Pounds 307m) through its IPO.
  • The indicative price range is Euros 2.26 to Euros 2.74, offering a 5% dividend yield at the midpoint.
  • BC Partners will reduce their stake in C&C from 90% to 37%.
  • Debt reduction has saved C&C Euros 220m (700m - 480m).
  • Cider's share of the long drinks market in Ireland increased from 4% in 1990 to 13% in 2001.
  • Cider market share grew in 2002 and 2003, despite an 87% increase in excise taxes in 2002.
  • The 87% excise tax increase shaved C&C's margins by 3 percentage points in 2003, reducing earnings by Euros 12m.

Sources:

  • "John Murray Brown C&C, which owns the Bulmers cider brand in Ireland, is to woo investors with an attractive dividend when it launches its initial public offering on May 19." (Source: Lex, Page 20)
  • "The company, which is raising Euros 440m (Pounds 307m) before expenses through a sales offering to institutions, said its full-year dividend would be covered 'at least two times' by earnings before amortisation of goodwill and intangible assets." (Source: Lex, Page 20)
  • "The pathfinder document, issued yesterday, values the company at between Euros 725m and Euros 875m, somewhat less than the price put on the equity by Citigroup and Goldman Sachs last week." (Source: Lex, Page 20)