TSB IPO price range announced

Lloyds banking group and its advisors have now agreed on a timeline and price range for the float of 25% of TSB.

TSB logo
Source: Bloomberg

The final price will be somewhere in the range of 220-290p, depending on demand. The company is hoping to announce the final price on 24 June along with the start of conditional trading. The mid-point of this price range would give TSB a market capitalisation of £1.275 billion, with the top end of the range valuing the company at £1.4 billion.

The primary driving force behind this announcement has been Lloyds’ need to meet the European Union rules on state aid after the UK government’s intervention in stabilising the company during the financial crisis of 2008. This IPO will see TSB quoted on the London Stock Exchange and become the seventh largest UK retail bank through its 631 branches and 4.5 million retail customers.

Questions still hang over the company following the aborted attempt of Co-operative's efforts to acquire the company. The initial £700 million followed by £400 million – contingent on targets being met – that Co-op was willing to pay is significantly less than the company’s current valuation of itself, and it is not entirely clear where this premium has arisen from.

Lloyds will have until the end of 2015 to dispose of its entire holding in TSB and, this is an initial 25% stake, it would be safe to assume that they feel there will be a premium to be had by the market ensuring a healthy float and a share price that adds value for its IPO investors.

So far, 2014 has seen an influx of companies looking to gain quotes on equity markets and, although the markets were enthusiastic at the beginning of the year, this has cooled somewhat.

Clothing manufacturer Fat Face has pulled its plans to float and, following its recent IPO, Saga has seen shares struggle in the first couple of months since quoted. Although part of the company’s share price woes may be down to the company’s perceived cheekiness in being categorised as a leisure company rather than the more obvious insurance firm.

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