CRH registrar faces #12m bill for rights issue miscalculation

CRH's #1.1 billion (£870 million) rights issue, the biggest ever fundraising by an Irish company and the second biggest rights issue ever conducted in Europe, has ended in embarrassment.

CRH's registrar, Capita Corporate Registrars, is facing a potential #12 million bill after an error in calculating the take-up to the rights issue.

Four weeks ago, CRH announced the one-for-four rights issue priced at #10.50, a deep discount to the CRH price in the market.

At the time it was expected that, given the size of the discount, the take-up of rights by CRH shareholders would be high and that underwriters Davy and UBS Warburg would be left with little of the rights issue to place in the market.

Last Wednesday was the closing day for the rights issue and early the following morning CRH told the market that 89.9 million of the new shares had been taken up by shareholders.

This left a "rump" of the rights issue of 13.75 million shares and these were placed with institutions by Davy and Warburg at #16.50 each.

But shortly before the market closed yesterday, CRH issued another statement which said that the actual take-up to the rights issue was 98 million shares and that the rump was actually just 5.5 million shares. "The registrars are now considering how best to correct this error which may or may not involve the purchase of CRH shares," the statement added.

But the placing of the 13.75 million shares last Thursday was a firm deal and cannot be unwound even though the actual size of the rump was 5.5 million shares.

This means that 8.2 million shares have to be found from somewhere to fulfil last Thursday's placing.

Sources close to the underwriters made it clear that the fault lies squarely with the registrars Capita and that Capita will have to find the 8.2 million shares even if that means going into the market and buying shares at the current #18 to sell to the institutions which bought the rump last week at #16.50.

"It's crystal clear, institutions bought shares from the underwriters at #16.50 last week and will expect those deals to be fulfilled especially as CRH shares have risen nearly 10 per cent since then."

Mr Albert Farrell of Capita said the registrars would decide overnight what action to take. "We will look at the whole matter. It's doubtful whether we'll go into the market," he said, adding that the final decision on what action Capita will take will probably be taken by the group's head office in London. Capita is a subsidiary of a major British firm of company registrars.

CRH's general manager-finance, Mr Myles Lee, was reluctant to go beyond CRH's statement to the stock market, but he said the buyers of the 8.2 million shares would have to be satisfied. He declined to speculate on what action the registrars might take, or whether CRH would retain Capita as its registrars.

Market sources believe, however, that to protect its own reputation among institutional investors CRH is likely to insist that those institutions which bought the first rump of the rights issue are fully satisfied. A further statement is likely within the next day or so.