Capita Corporate Registrars has taken an upfront loss of about #14.4 million (£11.4 million) to correct an error it made in calculating the take-up of the #1 billion CRH rights issue. But Capita's parent, the UK-based Capita Group, said the group would suffer no loss - it is understood that it is covered by professional indemnity insurance. Capita had to buy 8.2 million CRH shares on the Dublin and London markets yesterday to cover the sale of more shares than should have been sold in the CRH placing that followed the rights issue. The error arose because the registrars understated the take-up of the rights issue and, as a result, overstated the number of shares available for placing after the issue. Capita bought 8,223,514 CRH shares on the market at #18.25 each yesterday. But it will be able to recover only the #16.50 per share paid by institutional shareholders who bought the shares from underwriters Davy and Warburg.
CRH closed at #17.80 in Dublin and #18.12 in London yesterday having touched #18.50 early in the day as the market anticipated a big volume demand from Capita.
The error, reported to the Stock Exchange on Monday, resulted in the sale of 8.2 million more CRH shares than were available for sale or allocation in the biggest ever fundraising by an Irish company. When its rights issue closed on March 27th, CRH announced that its shareholders had taken up 89.9 million of the 103.6 million shares on offer, a take-up level of 86.7 per cent. At that take-up level, a rump of 13.75 million shares remained for placing by the underwriters. However, on Monday evening CRH had to issue an embarrassing correction about the take-up levels. Some 98.1 million shares had been taken up by shareholders, 8.22 million more than originally notified by the registrar. This reduced the shares in the rump to just 5.5 million.
CRH said it had been notified by its registrars that "there was an error in the previously announced acceptance level of 86.7 per cent". Sources said human rather than systems error was involved.
CRH launched a one-for-four rights issue on March 6th to raise #1.1 billion, offering the shares at #10.50 each to shareholders. As the rights price was at a discount to the then #20.44 market price, a big take-up of rights shares was expected. Underwriters Davy and UBS Warburg were expected to be left with few shares to place in the market.
On Thursday, March 29th when CRH told the market that 89.9 million of the new shares had been taken up, Davy and Warburg set about placing the rump of 13.75 million shares with institutional investors. They were fully placed at #16.50 per share. But Monday's announcement of the correct rights take-up figures meant that the rump was just 5.5 million shares. The underwriters said their placing of the 13.75 million shares with a three-week delivery deadline was a firm deal which could not be unwound to correct the situation. The result was that 8.2 million shares had to be found to fulfil the oversold orders. Capita's options for correcting the error were limited to buying shares in the market or making a cash payment to dissatisfied shareholders in lieu of shares or to some mix of these options, according to one source. After discussions yesterday with its insurer, Capita bought shares in the market.
In a statement last night, Capita stressed: "No shareholder of CRH has suffered any loss and no further corrective action is required."
