IG Index bets on return to stock market

SPREAD-BETTING group IG Index is in talks with advisers about a possible return to the stock market less than two years after it was taken private in a £143m buyout.

The firm’s owner, CVC Capital Partners, a leading buyout house, has begun contacting investment banks to invite them to pitch for a mandate to advise the business on a possible flotation. Sources said that IG, founded by millionaire Tory party donor Stuart Wheeler, could be worth between £250m and £300m today.

More than half a dozen banks and stockbrokers have been sounded out about advising on a deal, including Collins Stewart, Merrill Lynch and UBS.

A spokesman for CVC said: “We can confirm that we are in the process of appointing financial advisers to evaluate the strategic options for IG Group, including a float.

“No final decision has been taken. When any of the options has been agreed, an announcement will be made. We have no further comment to make at this stage.”

While a trade sale has not been ruled out, it is understood that a flotation remains CVC’s preferred route to exit its investment. “The business is really motoring,” said one industry source.

By trying to float IG Index in the first quarter of this year, CVC may be able to capitalise on the growing appetite for betting-related companies by institutional investors.

Gaming VC, which floated on the Alternative Investment Market last month, has seen its shares rise by 49.5%, while online poker group Party Gaming appointed Dresdner Kleinwort Wasserstein and Investec as advisers last week to examine a possible flotation. If it decides to go public, it would be big enough to qualify for the FTSE 100 index of Britain’s biggest companies.

But a flotation of IG Index would also represent a swift return for CVC. Traditionally, private-equity groups hold companies for between three and five years. While an exit after two years is not unheard of, it is rare.

Much of the recent growth at IG is said to have come from the launch of a new product known as “binary betting”. This is like a combination of a fixed-odds bet and a spread bet and allows punters to make bets on various financial markets, such as the closing level of the FTSE 100.

CVC bought IG Index in March 2003, when it backed chief executive Nat le Roux in a management buyout. In the first year since the deal, profits have climbed by nearly 50%.

Accounts for the year to May 2004 show that IG Index had earnings before interest, tax, depreciation and amortisation of about £23m, compared with just over £15m the previous year. IG group companies have more than 15,000 active clients worldwide.

The sale to CVC provided an exit for Wheeler, who founded the firm from his living room in 1974. He floated the business in 2000. Wheeler made £34m from the sale of his 24% holding. Prior to CVC he had raised a further £22m from various other share sales. Wheeler, famous for his £5m donation to the Tories, spent part of the proceeds on repairing Chilham Castle in Kent, which he bought in 2002.

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