The Australian government yesterday launched its turmoil-buffeted multi-billion-dollar float of stock in telecoms giant Telstra, offering discounts to sweeten the offer of 2.15 billion shares.
Under the largest offer in Australia since the last Telstra sale in 1999, when stock in the company was worth twice its current price, retail investors will pay a first instalment of A$2 (US$1.48) per share.
That represents a A$0.10 per share discount to the pricing for institutional investors' as Canberra moves to boost the attractiveness of the float of part of its 51.8 percent stake in Telstra, the unveiling of the prospectus revealed.
The second instalment will be due on May 28, 2008, and will be set by an institutional book-building process -- in which offers for shares are compiled -- starting on Nov. 15.
The announcement failed to impress the market and Telstra shares closed the day 2.61 percent lower at A$3.73 -- valuing the float at A$8 billion.
Existing investors will receive an additional share for every two they still own on Nov. 28 and will be guaranteed at least 3,000 Telstra shares in the offer, according to the prospectus.
"This puts existing shareholders very much at the front of the queue for shares and in that way we are rewarding them for retaining their shares," Finance Minister Nick Minchin said.
As a further incentive, retail investors will receive one bonus loyalty share for every 25 shares they purchase in the third sale of Telstra shares, or "T3," and hold onto them until May 2008.
Retail investors will also be guaranteed 2,000 shares each in an offer where the government says it retains the option to accept over-allocations of up to 15 percent.
The minimum application amount will be 500 shares, with a maximum of 200,000 for retail investors.
"We envisage strong investor support for an offer of this size," Minchin said of the sale that opens to retail investors on Oct. 23 and closes on Nov. 9.
The sale represents about one third of the government's remaining A$22 billion stake in Telstra after the firm's plummeting share price forced Canberra to abandon plans for full privatization.
Details of the offer emerged after a delay in the prospectus launch reportedly caused by last-minute squabbling between Telstra and the government.
Telstra and its majority shareholder have been locked in an acrimonious public row that has raised fears of damage being done to the T3 sale.
Simmering tensions boiled over last month when Telstra's US chief executive Sol Trujillo opposed the government's bid to appoint consultant Geoff Cousins, a close associate of Australian Prime Minister John Howard to the board.
Trujillo began attacking government regulations imposed on Telstra as soon as he took over in July last year, earning a rebuke from Howard.
The prospectus stated risks associated with investing in Telstra, including the possibility that the appointment of Cousins could disrupt the board's effectiveness.
That phrase reportedly delayed the unveiling of the prospectus and Minchin conceded there had been conflict.