Myer prospectus revealed, IPO to value company at $3 billion

Department store Myer will offer shares at between $3.90 and $4.90 as part of an IPO that will see the company begin trading on 2 November with an enterprise value that could be as high as $3.16 billion.

According to the company’s prospectus released today, up to 499.5 million shares will be made available under the offer, with up to 585 million shares on issue on completion of the sale, with total proceeds to reach $2.3 billion.

The offer to retail investors will open on 6 October and close on 23 October, with the institutional offer to open on 28 October and close the next day. Trading is expected to commence on 2 November.

The company also included financial expectations for the 2010 financial year, saying earnings before interest, tax, depreciation and amortisation should come in at $330 million with pro forma 2010 earnings per share to be 27.3c to 28.3c.

A full year dividend will be paid to shareholders of between 20.5c to 21.2c, with the overall value of listed shares to reach up to $2.77 billion.

The prospectus said based on the 2010 forecasts, the company is valued on a multiple of 14.3-17.3 times. The 2010 dividend yield is set to be between 4.3-5.3%, with a payout ratio of between 70-80%.

It also said pro forma net debt will reach $392 million as of 25 July, which will bring the company’s total enterprise value to between $2.67 billion and $3.16 billion.

The offering is set to be the biggest listing on the ASX since the third stage of Telstra’s listing in 2006, and is expected to gain a large investment base from retailers.

Myer’s major stakeholders, equity firm TPG and Blum Capital, will maintain a stake of between 0-13.5% after the IPO. Currently the two companies control a combined 84.6% of the company.

The Myer family will maintain a stake of between 0-1.5%, with current Myer staff to retain a 7.7% stake. Staff will be offered $725 worth of shares at no cost to them.

The minimum application for Myer One cardholders during the priority offer is $2000 worth of shares, with employees also subject to the same minimum level.

Executive managers have all agreed to sell down an average maximum of up to 25% of their holdings, while chief executive Bernie Brookes will keep 90% of his shares.

Chairman Howard McDonald said in the prospectus the company has invested $400 million in rebuilding the business, and that the company has undergone a transformation.

“Plans are well underway to open 15 new stores in the next five years with 12 conditional agreements for lease already signed,” McDonald said.

“Myer’s strong operating cash flows will fund its planned growth strategies as well as support a forecast fully franked FY2010 dividend yield of 4.3 per cent to 5.3 per cent, and beyond the forecast period a planned payout ratio of 70 per cent to 80 per cent of net profit after tax.”

Myer was taken private by a group led by TPG in 2006, after it purchased the company for $1.4 billion from the Coles Group.