McGrath set for $2.10 IPO float next month

Some two decades in the making, the real estate company McGrath Ltd has fixed its initial public offering price at $2.10, according to a term sheet sent to clients this morning.

The authoritative AFR column Street Talk says this equates to a pro forma consolidated FY16 forecast NPATA per share of 13.4 times and an enterprise value/pro forma consolidated FY16 forecast EBITDA of 8.8 times. 

The annualised forecast FY16 dividend yield at the offer price of 3.7% through JPMorgan and Bell Potter Securities. 

The offer size is $129.6 million for a market capitalisation of $281.8 million. 

The enterprise value at the offer price is $272.1 million. 

The bookbuild closes on at 5pm today with the prospectus to be lodged tomorrow.

The shares start trading on December 7 (on a deferred settlement basis) and December 9 (on a normal settlement basis).

The float was only possible after McGrath Real Estate Agents resolved issues in late 2014 over an assessment of $6 million by NSW Office of State Revenue.

The OSR alleged the McGrath group were liable for payroll tax on commission payments received by “independent” agents who were contracted to them from July 2007 to June 2012.

The settlement terms were confidential, but Geoff Lucas, chief operating officer for McGrath Estate Agents confirmed to Property Observer that the dispute with the OSR was resolved in September 2014, shortly after the issue garnered public attention.

Property Observer revealed that the prominent estate agency had been issued OSR payroll tax assessment notices.

The total amount being disputed is $6,072,810, inclusive of payroll tax, interest and penalty tax.

The directors had believed McGrath Sales Proprietary Limited had no payroll tax obligations.