Norwich Union offers members discount on shares

NORWICH Union policy holders who qualify for free shares next month when the group goes public have been offered a discount of 25p a share on any additional stock they purchase at the time of flotation.

The company's offer to its new shareholders, issued yesterday, translates into savings of around £40 off the minimum share offer of £400. Under the offer terms members can subscribe for up to £100,000 worth of new shares at the discounted price.

When the company is floated in London on June 16th, 150,000 Irish policy holders will hold shares with an estimated total value of more than £170 million.

Members will this week receive a mini prospectus which explains how to buy any further shares at the special discount price. This offer must be taken up by June 10th.

In its prospectus, Norwich Union has now indicated that the shares are expected to be floated at between 240p and 290p sterling, with additional shares taken up by members costing between 215p and 265p. Norwich Union's group general manager in Ireland, Mr Vincent Sheridan, said: "Norwich Union is keen to encourage members to continue to participate in the future of the group. I very much hope that they will take advantage of this opportunity to buy further shares at a 25p discount."

Policyholders who do not wish to buy any further shares must return their applications for free shares by June 5th and will receive their share certificates on June 13th.

Those taking up the offer to buy discounted shares must return this application by June 10th, but will not receive any share certificates until June 20th, four days after the first day's trading.

The flotation, on June 16th, will raise £1.75 billion in new capital for the Norwich Union group, with a further £670 million being raised to fund cash payments to certain members as part of the free share arrangements. After the flotation, the group is expected to have a stock market value of between £4.9 billion and £5.6 billion.

Norwich Union is setting up special sharedealing arrangements for its members to allow them to buy or sell their shares for a period after the flotation. The share dealing scheme will be operated by a postal service with a fixed charge of £7.50 on all sales up to £7,500.

Many of the Irish stockbrokers and banks are understood to be also considering offering special flatrate dealing services for Norwich Union shareholders.

Meanwhile, eligible policyholders are expected to come in for a bigger than expected windfall, with the shares likely to begin trading at a higher than expected price.

A few London brokers are fore casting that the shares could begin trading at a price of up to 350p. Other are more cautious, however, suggesting that something between 270p and 290p is more realistic.

The higher price expectations are based on the recent strong performance of financial stocks in the London market. Brokers are also basing their optimism on the successful Alliance and Leicester flotation and will be paying particularly close attention to the forthcoming Halifax flotation.

One SG Warburg analyst said the expectation of a higher issue price was largely being driven by the extent to which the market would be squeezed by institutional investors trying to buy up stock. But he stressed that the Norwich share issue was particularly large.

Another factor likely to influence the performance of Norwich Union's share price after flotation is the speculation that it could become the target of a takeover bid. Reports have suggested that the Australian insurance giant, AMP, could be poised to make a bid for the company.