Momentum is building for the float of McGrath Estate Agents despite talk of a looming fall in residential property prices, with the starting gun expected to fire on the deal within days.
Apparently, meetings between the company and its joint lead managers were held about a week ago, with efforts being ramped up to float the business with an estimated market value of at least $200m before Christmas.
Research would be released to prospective fund managers on its float during the last week of October, under the watch of joint lead managers JPMorgan, Bell Potter and adviser Luminis Partners, sources said.
The official management roadshow is earmarked to happen in the week of the Melbourne Cup in November. It will begin with meetings in Asia before presentations are held in the local market from the following week onwards.
The real estate chain that is run by its high-profile founder John McGrath has 73 offices and had $12.3bn in residential sales during the 2015 financial year.
It is a company being pitched as something of a roll-up story, with McGrath recently buying the largest franchise group within its network, comprising 10 offices across northern Sydney, in a deal believed to be worth about $50m.
More acquisitions are also on the cards.
The IPO will be an interesting test for the market, given Macquarie analysts recently predicted that house prices could drop by as much as 7.5 per cent from March next year, driven by a slowdown in population growth, weaker credit growth and a surge in new homes hitting the market.
However, the argument is that the trend was for more property sales amid a downturn.
How much skin Mr McGrath keeps in the game will be critical, and the understanding so far is that he will not be selling more than 20 per cent of his current interest.
Some fund managers are believed to be meeting with the company this week, leading some to think advisers could be testing cornerstone investor appetite.
Others on the deal said this was not the case.
It is expected that McGrath will beat smaller rival LJHooker, which is planning a listing through Citi and Morgans, out of the gates.
Meanwhile, research is due to be released for the float of Seek Group spin-off IDP this week.
While the IPO size is not yet known, the company’s market value is expected to be more than $500m in the Goldman Sachs and Macquarie Capital-led deal.
The company is half-owned by Seek, while the remaining interest is held by 38 Australian universities.
This article first appeared in The Australian Business Review.