Boart Longyear, the international drilling company bought by a private equity consortium in July 2005, has launched its $2.65 billion initial public offering (IPO).
It will be the biggest equity capital raising since the government's $15.5 billion Telstra sell off in November and will likely test investor sentiment in an increasingly nervy market.
The offer is open to both retail and institutional investors with an indicative price range of $1.76 - $2.10 per share. The company will have a market cap of between $2.25 billion and $3.12 billion after the IPO.
If the float is successful the private equity consortium that owns it will more than double its money.
Boart Longyear's management bought the company for US$545 million ($730 million) from mining giant Anglo American along with private equity houses Advent International and Bain Capital. Macquarie Bank joined the consortium in 2006.
The IPO comes to the market at a nervous time for investors.
Australia's benchmark All Ordinaries index fell by over three per cent on Wednesday on the back of a 9 per cent fall in China's benchmark Shanghai Composite.
Speaking about the IPO, Constellation Capital's managing director Doug Little said it would likely be met with some scepticism by the market. "I do think people will be cautious about IPOs, given the recent corrections in the markets, but that's not to say a well managed company won't be supported."
He added that price was the real issue. "Past experiences with companies that have come out of private equity have shown us that they can be poor performers in the after market. It's essential that investors buy shares at the right price."
Shares in world's second-largest explosives maker Dyno Nobel, which listed in April last year after being sold by Macquarie Bank, have struggled since the float. They were trading at $2.24 yesterday afternoon, three cents below their offer price of $2.27.
Boart Longyear's chief executive Paul Brunner was positive. "With the demand driven by China and India, and supply constraints becoming increasingly prevalent, we expect strong growth in demand for drilling services and products in the mining industry to continue," he said.
The firm plans to list on the Australian Stock Exchange on at the end of March.
The institutional portion of the IPO will be raised through an accelerated bookbuild, which will take place April 2/3. The retail offer opens on March 12 and closes on March 28.
