Wednesday, 10 December 2008

Logica places shares and reduces dividend

(By Anthony Miller) Not for the first time Logica surprised investors announcing unexpected refinancing measures. Just after the market closed yesterday (Wednesday) Logica said it is to raise £85m through an accelerated bookbuild (to be completed by the morning!) and use the funds to reduce debt. The plan was to place 122m shares (8.3% of the current issued share capital) at a price to be finalised, but seems to assume Wednesday's 69p closing price. Key shareholders Schroders and Aviva, who between them hold some 25% of Logica’s stock, are apparently on board and the company is confident of raising the full £85m.

Logica also announced it is to peg the div for this year and next at ‘around’ 3p (’07: 5.8p) with progressive increases thereafter. Based on Wednesday's share price, this brings the yield down to 4% from 5% (based on Logica’s 118p share price at 31/12/07) - though any potential share price fall may well fix that 'problem'!

Management reiterated there had been no change in trading conditions since the mid-November trading update, yet they made no mention of any intent to raise more funds then, or when they announced a €500m refinancing package just two weeks ago. This placing may well be, as CFO Seamus Keating says, just a prudent move to shore up funding in uncertain times. But the implied sense of urgency may spook the market. Anyway, fortunately I am well out of the ‘guess the share price’ game now, and so will leave it to investors to interpret as they see fit.

The placing was very successful, with 135m shares going at 67p, raising just over £90m gross. It looks like this was a smart move and we could well see other players try to emulate it. Logica's shares opened a tad down and are now (9:30 am) trading around 66p.

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