Zoopla seeks £940m valuation in IPO

The pricing for Zoopla property group's IPO has been set at 200p to 250p per share, implying a market capitalisation of approximately £940 million, with final pricing expected to be announced around 19 June.

The valuation range is widely expected to be less than £1 billion, suggesting caution amid recent flotation fatigue.

At this pricing, Zoopla would be trading at a lower earnings multiple to Rightmove, its longer established rival, but all parties look keen to get the issue away while the housing market is still buoyant.

More than one million homes were marketed on Zoopla over the six months to 31 March this year, with monthly traffic to the Zoopla and PrimeLocation sites up by 10 million to 39.9 million compared with the previous year, a big rise that could easily reverse if the housing bubble pops.

The principal selling shareholders have agreed to, in aggregate, make available between 31% and 50% of their pre-IPO shareholdings.

Daily Mail and General Trust, the site's majority backer with a 51% stake, will welcome the cash injection. Its hard copy newspaper faces escalating competition from free papers, although its online presence, which is rather less harpy, has not been forced to charge online viewers like some of the competition because the sheer scale of its readership has generated strong advertising revenues.

The float will bring a windfall for founder Alex Chesterman, who also founded LoveFilm. He will receive a paper fortune of around £85 million though his 9% stake. Other shareholders include housebuilder Countrywide, which owns 6%, and LSL Property Services, which has a 4.9% stake.

Underlying earnings rose by over one quarter to £18.7 million in the six months to March 31, with Zoopla and its sister site, PrimeLocation, promising a £14 million dividend payout to shareholders.

Credit Suisse was contracted to work on options for the company last September, before Jefferies was asked to work on IPO plans more recently.

The maximum offer size is 214 million shares, assuming full exercise of the over-allotment option, and the minimum offer size is 93 million shares, assuming no exercise of the over-allotment option and maximum take-up of the member option.