Medibank Private has brushed off concerns that its planned $5.5 billion share sale could prove too expensive for many mum and dad investors.
The federal government hopes the privatisation of Australia's largest private health insurer will boost its coffers by up to $5.5 billion.
That would place it among the Australian share market's 100 largest companies when it starts trading on November 25.
The broad $1.55 to $2-a-share offer price to retail investors unveiled by Finance Minister Mathias Cormann in the company's prospectus on Monday surprised market watchers.
A $2 price would make it more expensive than its only Australian-listed private health rival NIB - with a price to earnings ratio above 21 compared to NIB's 18.
However Goldman Sachs Australia chief Simon Rothery, who is helping broker the share sale, denied that would price `mum and dad' retail investors out of the prospectus.
"The JLMs (joint lead managers) have done pre-offer research and got feedback from the institutions on the back of that research and the price range is set within those boundaries," he said.
"In terms of both private health insurance stocks and health sector stocks, we think the range setting for Medibank is indicative of the sector."
Senator Cormann pointed to strong demand including 750,000 Australians having pre-registered to receive the prospectus for what is expected to be 2014's biggest IPO.
Local and foreign institutional investor interest was also high, said Medibank chief executive George Savvides, who is about to depart for an international investor roadshow selling the IPO.
There are no limits on foreign ownership of Medibank, meaning it could end up majority foreign owned, with individual shareholdings limited to 15 per cent.
Mr Savvides' pay will jump from $1.2 million to a total package of up to $3.99 million.
Fund manager Peter Esho from 100 Doors said at $1.55 a share the offer was attractively priced but at $2 it was expensive.
"I would have preferred a narrower range and if it is fully priced it doesn't leave much in terms of short-term profit," he told AAP.
Medibank was a high quality business but if there was strong demand and it became fully priced that would then make it a minimum five year investment to get growth, Mr Esho said.
Net profit is expected to remain flat this year at $258.2 million.
Australian Shareholders Association chairman Ian Curry was critical of the broad pricing range saying it meant investors were unsure what they would pay.
However he was pleased retail investors would get a first shot at the IPO.
Future shareholder stand to receive an inaugural dividend of 4.9 cents a share in September 2015.
Medibank also plans to pay the government a $42 million final dividend, plus a $196.8 million special dividend.
The government reserved the right to change the date of the sharemarket debut, said Senator Cormann, alluding to recent volatility and heavy market falls.
MEDIBANK PRIVATE SHAPES UP FOR SHARE MARKET DEBUT
* Largest private insurer with 29.1 pct of the market and 3.8m customers
* Retail investors to pay $1.55 to $2 a share
* Minimum investment is $2,000
* Market capitalisation will be $4.3b to $5.5b
* Dividend pay-out ratio of 70-80 pct of net profit
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