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Polypipe Bursts Onto London Market

LONDON (The Deal) -- British plastic piping manufacturer Polypipe Group plc squirted 120 million shares onto the London market Friday, April 11, with an initial public offering priced at 245 pence a share and an opening market capitalization of 490 million pounds ($819.5 million).

The shares reached a high of 257 pence and managed to stay above water in conditional trading on Friday morning, despite a broad decline on the London market. But by early afternoon, the unlucky timing of floating in the middle of a global selloff began to take its toll as the shares drifted back below 250 pence.

Nevertheless, as a rare industrial stock among the spate of IPOs coming to market in recent months it had a more auspicious start than another private equity-backed stock, Teaneck, N.J.-based Phibro Animal Health Corp., which was due to start trading on Nasdaq this morning. Phibro reportedly priced at $15 per share, below its initial bookbuilding range of $16 to $18 per share. London-listed private equity firm 3i Group plc was expected to sell about 4 million shares in the Phibro offering, in which Bank of America Merrill Lynch, Morgan Stanley and Barclays plc were serving as joint book-running managers. Perella Weinberg is advising Phibro.

Polypipe's shareholders, Cavendish Square Partners LP and company management, made £294 million from the sale of their stock. Cavendish, a fund managed by London firm Caird Capital LLP, cut its stake in Polypipe from 82% to 23% in the IPO and can look forward to raking in a further £29 million and cutting its stake to about 17% if the over-allotment option is fully realized.

When conditional trading ends and the company is fully admitted to the Main Market of the London Stock Exchange on April 16, Polypipe will have a free float of about 60%.

Cavendish holds the former Bank of Scotland Integrated Finance portfolio and was spun off by Lloyds Banking Group plc in 2010 into a joint venture with Coller Capital Ltd. The integrated finance unit was among the legacy businesses Lloyds was required to sell following its disastrous acquisition of HBOS plc in January 2009. While it included a large number of construction and real estate investments considered to have played a large part in HBOS' collapse, it also held successful companies, including Polypipe. Lloyds still holds 30% of the joint venture, while Coller owns 70%.

When Polypipe announced its intention to float last month, it said it saw its return to the stock market after 14 years as an opportunity to take advantage of the emerging cyclical recovery in the U.K. construction market. The initial H in HBOS stands for Halifax plc, a bank which merged with Bank of Scotland plc in 2001. But Doncaster, England-based Polypipe has no historical connection with the U.S. pipe maker of the same name, despite the coincidence that Polypipe Holdings Inc., of Gainsville Texas, was also owned by a private equity firm called Halifax Group until its sale to Dura-Line Holdings Inc. in 2012.

Polypipe is advised by Mark Aedy and Liam Beere of Moelis & Co. LLC.

Deutsche Bank AG and Numis Securities Ltd. are acting as joint sponsors and joint bookrunners. The Deutsche Bank team includes Lorcan O'Shea, Charles Wilkinson and Simon Gorringe, while Heraclis Economides, Alex Ham and Richard Thomas are representing Numis. Colin Christie and Bruce Garrow of Canaccord Genuity Ltd. are acting as co-lead manager.

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