FILE PHOTO: The KKR & Co name is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., August 23, 2018. REUTERS/Brendan McDermid/File Photo
(Reuters) – U.S. private equity firm KKR & Co (KKR.N) and its partners have canceled what was expected to be the biggest Australian IPO of the year, the listing of their lender Latitude Financial, two sources told Reuters.
In what was to be their second attempt at listing in just over a year, KKR, Deutsche Bank (DBKGn.DE) and Varde Partners, decided to cancel the expected A$1 billion ($676.20 million) offering on Tuesday, because a large proportion of demand for shares was coming from hedge funds rather than desired long-term investors, the sources said.
The sources had direct knowledge of the situation but asked not to be identified since they are not authorized to talk to the media. A Latitude spokesman declined to comment but said the company expected to make an announcement on Wednesday.
Latitude had filed a prospectus with the regulator last month valuing the finance company at between A$2 and A$2.25 per share but over the weekend decided to discount the offer price by up to 20.9% due to low demand, Reuters reported.
The firm, which offers easy-access loans and credit cards with minimal paperwork, and its bookrunners were due to finalize the raising on Wednesday and shares in the new company were due to begin trading Oct. 18.
But despite expectations that a lower price would give the newly listed shares a better chance of trading higher, the group decided to pull the IPO because it did not have a “high certainty” that would happen, the sources said.
Many investors that would have taken shares in the company were not large, long-term investors and the owners did not want to risk “an adverse after-market outcome”, they added.
KKR, Deutsche Bank and Varde Partners founded Latitude in 2015 when they bought GE Capital’s Australian and New Zealand consumer lending arm for A$8.2 billion.
Last year, Latitude deferred a planned IPO that would have valued the business at about A$5 billion due to market conditions and a management change, while the country’s financial industry was also being scrutinized by a national misconduct inquiry.
Reporting by Paulina Duran in Sydney; Editing by Deepa Babington