A share price of 170 pence has been set for Vodafone group Racal Telecommunications Plc in what was yesterday described as the biggest issue since last October’s crash. Contrary to speculation that the shares would be offered at 175p the price is plumb in the middle of the 155p to 185p bracket suggested in last month’s pathfinder prospectus (CI No 1,016), and values the company at UKP1,700m. Approximately 200m ordinary shares will be on offer – 20% of the enlarged share capital – which will raise UKP340m for parent Racal Electronics Plc. The prospective price earnings multiple, on the basis of pre-tax profits of UKP71.7m for the year to March 31 1989, is a high 30.5 times. However Sir Ernest Harrison believes the price will prove attractive to investors due to the company’s outstanding potential and predicted a natural premium after dealings start in two weeks time. Based on the success of the Swedish NMT 450 cellular network, which started three years before Racal, the company expects market penetration to rise to 2.5% from the present 0.7% within another four years. Three quarters of the shares will be offered to Racal’s existing shareholders and holders of convertible loan stock on the basis of one share for every 4.4 shares or UKP11.5 loan stock held. The remaining 50m shares will be made available in the US and Europe. Racal is also offering 14m shares to the British public made up of any shares not taken up in the shareholder offer or, if this is insufficient, by shares re-allocated from the international offers. Sir Ernest said Racal had concentrated almost exclusively on developing a cellular network over the last few years and that proceeds from the flotation would now be used to develop Racal’s security and data communications interests. The 150m UK share offer has been fully underwritten by N M Rothschild & Sons Ltd and Goldman Sachs International Ltd at the offer price and the US offer of 35m shares has been underwritten by Goldman Sachs & Co, while the continental offer has been underwritten by a group led by Goldman Sachs and N M Rothschild. Share applications must be in by 10.00am, Friday October 21, and dealings are to start simultaneously in London and New York on Wednesday 26 at 1.30pm London time.
