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11 October 2015 |
Pets at Home sold its shares at 245 pence each on 13 March 2014, which values the company at 1.23 billion pounds. However, its debut was received with less market demand than Poundland's flotation, which occurred on the same day. On the first day of trading Pets at Home saw its share price fall 2.86% to close at to 238 pence a share, giving the company a correspondingly lower market capitalisation.
Pets at Home made the decision to float their shares in order to raise the capital required to expand their business across the UK.
It has been suggested that the difference in the market response to both companies was due to the differences in net debt of the companies. Pets at Home had been financed by a proportionally high amount of debt. On the other hand Poundland's parent company only financed 25% of the acquisition price through debt. The market reaction is not surprising as a lower level of debt means that a company will be better positioned to use funds to invest in future growth and/or reward shareholders (as opposed to using the money to pay interest).
Goldman Sachs, Bank of America Merrill Lynch and Nomura were involved in providing financial advice relating to the IPO.
Simpson, Thatcher & Bartlett LLP and Clifford Chance LLP provided legal advice relating to the IPO.