Bain Looking for £1bn Flotation for UK Brick Company


September 29, 2015


Private equity firm Bain is set to help the UK brick company, Ibstock, list on the stock exchange. Ibstock is among the UK’s oldest and largest brick companies and the initial public offering is expected to raise around £1 billion. The IPO comes just less than a year after the company was taken private by the private equity firm.


Bain Takes Ibstock Private


The US-based private equity firm took the company private less than a year ago. The deal was worth £414 million and it saw Bain pay £295 million in cash to buy its share in the company.


Bain and its management team are currently in charge of 25% of Ibstock’s shares and the firm is looking to sell all of the shares in the IPO. The company says it hopes to raise around £100 million through the listing and use it to refinance the debt Bain put in place during the takeover.


The potential £1 billion flotation would mean a swift exit for the private equity firm. In addition, its flotation valuation aims would provide great returns for the firm.


The private equity firm bought the company from CRH, the building materials company. Ibstock had been going through a turbulent time. In 2008, the company’s volumes declined by 40% and it had to mothball a plant, as well as place around 35% of its workforce on reduced pay.


Great Growth Potential


Ibstock currently has around 40% market share in the UK’s clay brick market. It’s also a big player in parts of the American industry through the Gel-Gery subsidiary that operates in the northeast and midwest of the country.


Wayne Sheppard, the chief executive of Ibstock, was quoted in the Telegraph saying, “With UK brick demand now exceeding current manufacturing capacity, a significant opportunity has been created for a UK manufacturer to expand capacity”.


The price of clay bricks has also gone up in the last year. This increase has mainly been driven by strong demand and lower supply. In the last year to July 2015, the price climbed up by 6.7%.


The increase in revenues, according to the company, justifies the high valuation. It has increased its profits from £29 million in 2012 to £87 million in 2015. It’s also planning to open a new factory in Leicester, showing the potential growth opportunities for the company.


It is expected the company will list in October. JPMorgan and UBS have been appointed as the global co-ordinators for the sale process.


Reasonable Valuation?


Unsurprisingly, the quick turnaround has gotten some people to question the previous privatisation deal. Jim Armitage wrote in his Evening Standard column that the deal last December was either CHR selling too low or Bain selling too high this time around. He went on to say the deal was probably “a lot of both”.


Irish Times also said the IPO price is “extremely ambitious”, despite the slight rebound in the UK housing market. The article also pointed out some of the discrepancies between the IPO plans and the sale price last December.


It remains to be seen how well the company can do in the end and if the markets agree with the valuation.

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