DFS to be valued at around £585m

The valuation, which will place it outside the list of top ten Yorkshire PLCs, follows a weakening in demand for IPOs as the market prepares for an uncertain outcome in May’s general election.

Two other floats this year, John Laing and HSS, have been priced at the bottom of their ranges as last year’s float fever shows signs of burning out.

Following the pricing, independent retail analyst Nick Bubb said on Twitter: “Ouch: the DFS market cap will be only £585m at the mid-point of the indicative price range. Sounds like the IPO has not been a great success.”

However Hargreaves Lansdown’s head of equities Richard Hunter said: “It sounds like it’s at the lower end, but it’s not a million miles away from what we were expecting.”

The Doncaster-based group said it will have an enterprise value, seen by analysts as a more accurate assessment of a company’s real value, of around £784m, which is below original hopes of £1bn.

DFS plans to raise nearly £100m from the IPO which it hopes will help transform it from “a great British business to a world class business”.

The Doncaster-based group has set the price range for its IPO at 245 to 310p per share.

The cash will help fund the group’s ambitious international expansion plans by reducing debts and thereby providing access to lower cost financing.

DFS, which is owned by private equity firm Advent International, has a quarter share of Britain’s £3bn upholstered furniture market with 105 stores in the UK, Ireland and the Netherlands.

The group expects to raise £98m through the listing on the London Stock Exchange, below the original target of £105m after the company realised that transaction costs would be lower than expected.

Final pricing is expected on or around March 6 with the listing taking place on March 11.

DFS’s board of directors and senior management can sell up to 30 per cent of their holdings. The management team, lead by chief executive Ian Filby, own 15 per cent of the company. However, Mr Filby said that management will remain strongly invested in the company post IPO.

“Our vision is to take DFS from being a great British business to a world class business,” said Mr Filby.

“We have a clear strategy to further broaden our appeal, enhance our service and ensure our products are easily accessible to customers through our UK and international store expansion programme, continued development of our multichannel proposition and constant enhancement of our product range.

“We have a proven business model and an excellent track record of delivering long term sales and market share growth, as well as strong cash generation and shareholder returns.

“We are excited about our future as a listed business and we are delighted to offer institutional and retail investors the opportunity to become shareholders of DFS.”

The offer will be extended to retail buyers so customers get a chance to be involved. Mr Filby said the group believes it is particularly important that employees get a chance to become shareholders.