michael-tsang

China IPOs Post World’s Biggest Gains of 2010 as Stocks Suffer Bear Market

by on May 27, 2010

By Michael Tsang and Inyoung Hwang May 28 (Bloomberg) — China has the world’s worst performing equity market this year and the best returns on initial public offerings. While the Shanghai Composite Index has slid 19 percent for the steepest drop among the 10 largest stock markets, IPOs are beating the country’s benchmark equity indexes by 33 percentage points on average in their first month of trading, data compiled by Bloomberg show. Chinese individuals restricted from international investments have helped snap up $25 billion in IPOs this year, three times more than were sold in the U.S., as inflation erodes savings and the government clamps down on property speculation. The rally by newly listed companies has made their shares almost twice as expensive relative to profits as the broader stock market , a sign to firms from KBC-Goldstate Fund Management to hedge fund Platinum Partners that a bubble may be forming. “Most of the China IPOs are overvalued,” said Larry Wan , Shanghai-based deputy chief investment officer at KBC-Goldstate, which oversees about $583 million. “It’s difficult to believe they are going to be able to deliver the sort of exponential growth that the valuations imply.” The fastest expansion among the 20 biggest economies has helped spur the surge in China’s IPO market. The country’s gross domestic product grew 11.9 percent in the first quarter, the most in almost three years and about four times the U.S. GDP. World’s Biggest IPO The amount raised from Chinese IPOs may double after the sale by Beijing-based Agricultural Bank of China Ltd. The nation’s third-largest lender by assets will seek at least $30 billion in Shanghai and Hong Kong, according to the Beijing Times. That would be the world’s biggest initial offering, exceeding the $22 billion deal by Industrial & Commercial Bank of China Ltd. of Beijing in 2006. Chinese IPOs have advanced 32 percent on average in their first month of trading, while the Shanghai Composite Index and the Shenzhen composite declined, Bloomberg data show. The rally by newly listed companies has been primarily fueled by individual investors, even as concern that Europe’s debt crisis will hamper the global economic rebound spurred a selloff in equities around the world, according to Andy Xie , an independent economist in Shanghai. “Chinese investors have this traditional belief that you can’t lose money buying new stocks,” said Xie, formerly Morgan Stanley’s chief economist for the Asia-Pacific region. “This is not sustainable. China’s economy has big bubbles, so does the IPO market. Investors can’t be fooled forever.” Inflation, Property Market Local investors who have a total of 146 million brokerage accounts are seeing their investment choices outside of equities limited by inflation that’s eroding China’s $7.2 trillion of savings and government curbs on mortgage loans. Consumer prices climbed 2.8 percent last month, surpassing the one-year savings rate of 2.25 percent. The pace of inflation is forecast to rise 3.4 percent this year, the median estimate of 18 economists surveyed by Bloomberg shows. Citigroup Inc. of New York and Paris-based BNP Paribas SA project that home prices will drop 20 percent this year, after Chinese policy makers increased bank reserve requirements three times in the past three months to slow lending. Property prices surged the most on record in April, according to the National Development and Reform Commission. “Chinese investors can’t allocate their money off-shore,” said Lei Wang , who helps oversee $20.2 billion at the Santa Fe, New Mexico-based Thornburg International Value Fund . “Most of the money is locked up at the home market, so for some of those investors, IPOs are a good short-term profitable trade.” Relative Value Gains by Chinese IPOs have pushed valuations to an average 46 times estimated profits, Bloomberg data show. That’s almost three times as much as companies traded in Shanghai , valued at 16 times earnings, and about double the ratio for Shenzhen-listed stocks. Chongqing Water Group Co. is valued at 35.1 times its estimated profit after a 59 percent advance in its first month of trading. That’s more than double the average price-earnings ratio for companies in the Shanghai gauge, which fell 5.2 percent over the same period. The $511 million IPO in March gave the supplier of water to the southwestern municipality of Chongqing a market capitalization of $4.9 billion. ‘Rocket Shots’ Investors in East Money Information Co. , the Shanghai-based provider of online financial information, paid 56 times the company’s estimated profits in its IPO, or 117 percent more than the average company in the Shenzhen measure of equities, Bloomberg data show. The company gained 93 percent in its first month of trading, helping to push its valuation to 92 times earnings, or more than three times the broader market. The Shenzhen index rose 4.9 percent in the same span. “A lot of the ones trading were really rocket shots,” said Uri Landesman , president of New York-based hedge fund Platinum Partners, which oversees more than $500 million. “It definitely does look like there could be bubble-like tendencies in the Chinese IPO market.” To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Inyoung Hwang in New York at ihwang7@bloomberg.net .

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China IPOs Post World’s Biggest Gains of 2010 as Stocks Suffer Bear Market

Jefferies Hires Former BofA, Cowen Bankers for Equity Capital Markets Team

by on May 11, 2010

By Michael Tsang May 11 (Bloomberg) — Jefferies Group Inc., the New York- based brokerage that specializes in mid-sized companies, hired Bank of America Corp.’s Ashley Delp to head its U.S. equity syndicate desk. The firm also named David Bohn, former co-head of private placements at Cowen & Co., to lead equity financing for closely held companies, according to Mark Connelly , Jefferies’ global head of equity capital markets. Delp, 35, and Bohn are among the managing directors that will help Connelly, who joined in August from Zurich-based UBS AG, oversee the second-ranked arranger for health care-related offerings in the U.S. this year. Connelly, 49, has added at least three senior managers since taking over as he seeks more business for the almost half century-old firm, which lags behind in overall equity underwriting. Jefferies hasn’t placed among the top 10 banks for U.S. initial public offerings, additional share sales and convertible bond issues in the past 11 years, according to data compiled by Bloomberg. “Our business is growing very, very rapidly right now,” Connelly said. “It represents a further expansion of an effort that we’ve been undertaking for the last four or five months to hire quality origination and equity capital markets product people. In terms of our capital markets team, we’d put our first team out on the field against anybody.” Delp and Bohn, 41, follow Craig McCracken , a former head of equity-linked origination at Charlotte, North Carolina-based Bank of America, who joined in December to head U.S. convertible bonds and equity-linked sales at Jefferies. ‘A Different Sell’ Connelly’s group has been a lead underwriter for two U.S. IPOs and 13 additional share sales this year, ranking 12th among banks with $867 million in sales, Bloomberg data show. New York- based JPMorgan Chase & Co. has won the biggest share of U.S. equity and equity-linked offerings in 2010, with $11.2 billion. Some of the disparity reflects Jefferies’ focus on mid- sized companies with higher than average earnings prospects, rather than private-equity backed offerings, in which leveraged buyout firms often pick banks that financed their LBOs, according to Connelly. “There’s really no competitive process to win that business and it’s a different sell,” he said. Jefferies has increased the proportion of deals in which it served as a lead underwriter to about 80 percent this year, according to Connelly. That compares with about 65 percent in 2009 and a third two years ago, he said. Health-Care Deals The brokerage is credited with helping six companies in the health-care industry raise $316 million this year, more than New York-based firms Goldman Sachs Group Inc. and Morgan Stanley , and behind JPMorgan, which was responsible for $388 million, data compiled by Bloomberg show. Jefferies helped Calix Inc. and DynaVox Inc. sell shares in initial offerings. Petaluma, California-based Calix, which sells connection equipment to telephone companies, raised $94.6 million in its IPO at the high end of its forecast range. The stock, which jumped 16 percent on the first day of trading on March 24, closed at $10.24 yesterday, 21 percent below its IPO price of $13. DynaVox of Pittsburgh, which sold $140.6 million in shares on April 21, has declined 3.3 percent since its IPO. That’s less than the 3.8 percent drop in the Standard & Poor’s 500 Index over the same period. Jesse Mark , 35, Jefferies’ global head of syndicate, said companies that have hired Jefferies for IPOs and have yet to file publicly will help bolster the firm’s standing. “We have a great opportunity in the IPO market,” said Mark. “Over time, we’re going to show very well.” To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .

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Jefferies Hires Former BofA, Cowen Bankers for Equity Capital Markets Team

Nasdaq Investigating Potential Erroneous Trades After U.S. Market Plunge

May 6, 2010

By Michael Tsang and Elizabeth Stanton May 6 (Bloomberg) — Nasdaq OMX Group Inc. said it’s investigating potentially erroneous trades involving multiple securities between 2:40 p.m. and 3 p.m. New York time, when the U.S. stock market tumbled. The Dow Jones Industrial Average plunged almost 1,000 points today before paring its decline and ended down 347.80 points, or 3.2 percent, at 10,520.32. About $700 billion of U.S. stock-market value was erased in less than 10 minutes, data compiled by Bloomberg show. Trades in Accenture Plc that drove the second-largest technology consulting company’s stock price down more than 99 percent to a penny were canceled by the CBOE Stock Exchange, according to data compiled by Bloomberg. A total of 19 trades of 100 shares each were executed at 1 cent in seven seconds from 2:47 p.m. to 2:48 p.m. in New York, a minute after the Dow average plunged by the most since the market crash of 1987, the data showed. Eighteen of the trades were executed on the CBOE Stock Exchange and were canceled. The first trade that sent Accenture to a penny was executed on the Nasdaq Stock Market. That transaction has yet to be canceled, the data showed. Accenture shares closed today at $41.09 , down 2.6 percent in New York Stock Exchange composite trading. The Dow average lost as much as 998.5 points, or 9.2 percent, before paring its drop. The Standard & Poor’s 500 Index fell as much as 8.6 percent, its biggest plunge since December 2008, before trimming its decline to 3.2 percent. To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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Burkle’s Americold Postpones Biggest U.S. IPO of Year as Swire Pulls Sale

May 6, 2010

By Inyoung Hwang and Michael Tsang May 6 (Bloomberg) — Billionaire Ron Burkle ’s Americold Realty Trust cut the midpoint price for its initial public offering by 33 percent after attempting the biggest U.S. IPO of 2010 at double the valuation of property firms worldwide. The warehouse operator owned by Burkle’s Yucaipa Cos. didn’t announce the final pricing for its initial sale yesterday after slashing the range to $9 to $11 a share from $14 to $16, according to a filing with the Securities and Exchange Commission. Americold was seeking to raise $660 million, down from the original $688 million, after increasing the number of shares offered to 60 million from 43 million. The reduction brought the midpoint price for the IPO in line with warrants Yucaipa holds that allow it to purchase stock from Americold at $9.81 each. Burkle initially tried to sell the shares in the Atlanta-based real estate investment trust two days ago as concern that Greece’s bailout may have to be extended to other indebted nations sent equity markets to their biggest slump in three months. “The valuation of the deal was a little rich,” said Walter Todd , who helps manage about $800 million at Greenwood Capital in Greenwood, South Carolina. Investors also “asked the obvious question, ‘Why pay $14 when the warrants were issued at $9.81?’ It hit at the wrong time in the market and investors pushed back,” he said. Debt Offering While the size of the IPO was cut, Americold increased its planned debt sale that will coincide with the offering to $325 million from $300 million, the SEC filing showed. The company also scrapped its plan to use the IPO proceeds to pay Yucaipa $30 million in advisory fees and instead will issue 3 million shares to Burkle’s firm. New York-based Goldman Sachs Group Inc. and JPMorgan Chase & Co. are managing the IPO. Burkle, who made his fortune buying and selling supermarket chains and employed former U.S. President Bill Clinton as an advisor, is seeking investors for a company that has lost money for four straight years. While U.S. property trusts have surged 16 percent in 2010, he was asking for a higher valuation than any REIT that owns warehouses or industrial properties except one, Bloomberg data show. At the original IPO midpoint price of $15, Americold estimated that it would have $6.46 of tangible book value per share, the company’s filing showed. That meant buyers would have been paying 2.32 times more than the value of the REIT’s net assets, excluding those that can’t be sold in liquidation. In the Money The median for 262 property trusts globally was 0.92 times, while warehouse and industrial REITs traded at $1.12 per dollar of tangible net assets, data compiled by Bloomberg show. Burkle’s firm received warrants on Dec. 10 that enabled it to buy 18.6 million shares from Americold at $9.81 each in exchange for exclusive rights to negotiate with Vancouver-based Versacold International Corp., which is 49 percent-owned by Yucaipa, on the purchase of warehouses. At the original midpoint, Yucaipa would have reaped an instant gain of 53 percent from the warrants, which can be exchanged for common stock. The increase is more than double the Bloomberg REIT Index’s 22 percent advance since Dec. 10 and nine times the 5.8 percent rise for the Standard & Poor’s 500 Index . The profit from the warrants would now be 1.9 percent. Yucaipa of Los Angeles will be prohibited from selling shares for 180 days, under the terms of the lock-up agreement. “The big buyers are going to ask why Yucaipa can buy the stock so cheap when that dilutes the investors,” said Eric Green , a Philadelphia-based fund manager at Penn Capital Management, which oversees more than $5 billion. “IPOs are considered the riskiest type of investment. Unless it’s in a great sector and the market is at least stable, it’ll be difficult to get a sale done.” To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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New Century Shipbuilding Shelves Plans for Largest Singapore IPO This Year

May 4, 2010

By Michael Tsang May 5 (Bloomberg) — New Century Shipbuilding Ltd. , the fifth-largest shipbuilder in China, canceled a S$666 million ($483 million) initial public offering that would have been this year’s biggest IPO in Singapore. The company “intends to review the situation” and will consider restarting its IPO in the “near future,” without giving a reason for withdrawing, according to a statement on the Singapore Exchange Ltd.’s website yesterday. New Century, based in Jingjiang in southeastern China, was scheduled to sell 560 million shares at a maximum price of S$1.19 each today, the company’s prospectus and Bloomberg data showed. The IPO would have given New Century a market value of S$5.31 billion. The company initially sought as much as S$1.5 billion ($1.1 billion), two people with direct knowledge of the matter said last month. The original amount in U.S. dollars would have been the largest ever by a Chinese company in Singapore, according to data compiled by Bloomberg. UBS AG of Zurich was hired to lead the sale. New Century shelved the offering as concern the European sovereign-debt crisis is spreading to Spain and Portugal roiled equity markets. Moscow-based UralChem Holding Plc and Grupo T- Solar Global SA of Madrid have postponed IPOs, and companies from Excel Trust Inc. in San Diego to Milwaukee-based Douglas Dynamics Inc. have reduced initial sales in the past two weeks. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .

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Apollo Selling Metals USA Shares in First IPO of Takeover Target Since ’08

April 8, 2010

By Michael Tsang, Inyoung Hwang and Edmond Lococo April 8 (Bloomberg) — Apollo Global Management LLC, the leveraged-buyout firm run by Leon Black , is selling shares in Metals USA Holdings Corp., the firm’s biggest initial public offering of an American company since the credit crisis. Metals USA , the Fort Lauderdale, Florida-based company that shapes steel into parts, plans to raise as much as $211 million offering stock at $18 to $20 today, a regulatory filing showed. At the middle of the price range, the shares would be valued at more than three times what the owners including Apollo originally paid, a discount to its two smaller North American competitors and 29 percent more than its biggest rival, Reliance Steel & Aluminum Co. , Bloomberg data show. The deal comes after U.S. stocks rose to an 18-month high and seven companies sold shares within or above their price ranges. The IPO is the first for a company that Apollo acquired since Verso Paper Corp. offered $168 million in May 2008 as the credit crisis worsened, sending the stock down 71 percent. “We’re turning the corner in the IPO market,” said Jack Ablin , the Chicago-based chief investment officer of Harris Private Bank, which oversees $55 billion. “Investors tend to put private-equity deals on a lower rung than standard IPOs. This will certainly serve as a pretty valuable barometer for any other private-equity firm waiting in the wing.” HCA, KKR HCA Inc. is preparing a $3 billion IPO, two people with knowledge of the matter said yesterday. A group led by KKR & Co. of New York and Boston-based Bain Capital LLC acquired the Nashville, Tennessee-based hospital chain four years ago in a $33 billion buyout. U.S. IPOs stumbled at the start of 2010 as the first 14 deals were cut by 24 percent on average, Bloomberg data show. LBO firms took some of the biggest discounts after distributions to clients last year decreased to the lowest since at least 2000, according to data from London-based Preqin Ltd. Blackstone Group LP in New York, the world’s largest LBO firm, raised less than half of what it sought for Graham Packaging Co. of York, Pennsylvania, in February. Generac Holdings Inc. , the Waukesha, Wisconsin-based maker of generators backed by former bankers at New York-based JPMorgan Chase & Co.’s private-equity unit, cut its IPO by 29 percent. “People are a little bit more suspect about these kinds of deals,” said Michael Yoshikami , who manages $1 billion as chief investment strategist at YCMNet Advisors in Walnut Creek, California. Lehman Brothers Demand for U.S. IPOs has recovered in the past month as the Standard & Poor’s 500 Index reached its highest level since September 2008, when Lehman Brothers Holdings Inc. of New York collapsed in the biggest bankruptcy in history. Black, 58, the former head of mergers and acquisitions at Drexel Burnham Lambert Inc., founded Apollo in 1990. Apollo’s buyouts include Harrah’s Entertainment Inc. of Las Vegas for $27.2 billion including debt in January 2008, and the takeover of Parsippany, New Jersey-based Realogy Corp. in April 2007. Apollo manages $54 billion. Apollo took Verso Paper public a year later. The Memphis, Tennessee-based company sold shares at $12 each after cutting the IPO by half. The stock declined 17 percent in the first day of trading on the New York Stock Exchange. Verso Paper closed at $3.50 yesterday, 71 percent less than IPO buyers paid. The sale of Metals USA, the ninth-largest metals processor in North America, according to Purchasing magazine, will give IPO investors a 29 percent stake and value the company at $686 million when it lists on the NYSE under the ticker MUSA. Debt, Dividends Metals USA plans to use proceeds to redeem $171.6 million in debt due in 2012, some of which is held by Apollo and its affiliates. The $300 million of notes were sold in July 2007 to pay a $130.3 million dividend to owners including Apollo and redeem notes issued a year earlier. Stakeholders used the 2006 notes to pay themselves $144.8 million, its filing showed. Money from the IPO will reduce Metals USA’s debt to $307 million and increase its cash reserves to $16.4 million, giving the company an enterprise value , or the sum of its stock and debt minus cash, of $977 million. Based on the company’s forecast for the first quarter, Metals USA would generate $90.1 million in earnings before interest, taxes, depreciation and amortization over the full year if its profit growth matched consensus estimates for the three-biggest listed companies in the industry, according to data compiled by Bloomberg. The 10.8 times enterprise value-to-estimated Ebitda ratio is 8.1 percent less than A.M. Castle & Co. of Franklin Park, Illinois, and 20 percent lower than of Bedford Heights, Ohio- based Olympic Steel Inc., which Metals USA cites as competitors. Relative Value Metals USA’s valuation is 29 percent more than Los Angeles- based Reliance Steel’s , the largest company in the industry, which trades at 8.41 times estimated 2010 Ebitda. Demand for metals is rebounding as the economy recovers from the longest recession since the 1930s. U.S. steel prices rose to a 16-month high in March, according to Purchasing. The sale will create instant profits for Apollo and its co- investors, which contributed about $140 million to the purchase of Metals USA in 2005. The owners paid an average per-share price of $5.74, the filing showed. The value of their investment would more than triple at $19 a share. “Steel prices have been moving, so there maybe is a little appetite for this one,” said Scott Billeadeau , who helps manage $19 billion at Fifth Third Asset Management in Minneapolis. “But by definition, it’s private equity-backed. Buyers are going to be much more disciplined and discriminating in terms of what names they’re going to participate in.” To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Inyoung Hwang in New York at ihwang7@bloomberg.net ; Edmond Lococo in Boston at elococo@bloomberg.net .

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Primerica Sells at a Discount in IPO as Citigroup Dismantles Weill’s Deals

March 30, 2010

By Michael Tsang, Craig Trudell and Michael J. Moore March 30 (Bloomberg) — Primerica Inc., the insurance business that Sanford I. “Sandy” Weill used to build Citigroup Inc., is selling shares in an initial public offering at a discount to its competitors. Primerica plans to raise $252 million tomorrow, a filing with the Securities and Exchange Commission and Bloomberg data showed. At the middle of its price range, the Duluth, Georgia- based distributor of consumer-finance products from term-life insurance to mutual funds would be valued at 6.74 times earnings after accounting for its planned reorganization. That’s 29 percent less than the median for U.S. life and health-insurance providers, data compiled by Bloomberg show. Citigroup Chief Executive Officer Vikram Pandit is dismantling the company Weill built spending about $50 billion on Travelers Corp., Salomon Inc. and Citicorp during the 1990s to offer everything from insurance to stock broking and branch banking. The sale comes after the Standard & Poor’s 500 Index’s rally to an 18-month high spurred a rebound in the IPO market. “The Primerica deal reflects a shift from the financial supermarket model , where instead of being good at a lot of things, a company like Citigroup ended up being mediocre at everything,” said James Dailey , who oversees $140 million as chief investment officer at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. “Primerica could fetch a reasonable price. It’s been around a long time, its brand is established.” Primerica is one of four U.S. companies scheduled to sell shares through initial offerings this week. IPO Rebound All five IPOs since March 15 have priced within or above their forecast range as the S&P 500 extended a rebound from its 2010 low on Feb. 8 to 11 percent . The previous 14 deals since the start of the year had been cut by 24 percent on average, data compiled by Bloomberg show. Carlyle Group’s Windsor, Connecticut-based SS&C Technologies Holdings Inc. , which sells trading and investment management software to the financial industry, and Meru Networks Inc. of Sunnyvale, California, which makes Wi-Fi networking equipment, are scheduled to price their IPOs today. Carlyle, the Washington-based buyout firm that oversees $89 billion, won’t sell SS&C shares in the $161 million offering. Tengion Inc. , the East Norriton, Pennsylvania-based company trying to grow replacement organs and tissues, is also set to hold its IPO this week, according to Bloomberg data. Primerica , which has 100,000 representatives selling financial services to households with $30,000 to $100,000 in annual income, earned $495 million in 2009, an almost threefold increase from a year earlier. Relative Value Net income rebounded after declining 72 percent in 2008, when Primerica wrote down some of its goodwill, or the amount paid above the net asset value in an acquisition. As part of its reorganization, Primerica will transfer 80 percent to 90 percent of the “risk and rewards” from the life insurance policies that it sold and distribute $622 million in assets to Citigroup before the IPO, according to the filing. That includes a $454 million one-time dividend to Citigroup. At the middle of its $12 to $14 price range, the company is valued at 6.74 times its 2009 per-share income of $1.93, after taking into account a decrease in revenue and profit that would have taken place if the reorganization occurred on Jan. 1, 2009, according to its filing and data compiled by Bloomberg. That’s less than the median 9.52 times price-earnings ratio for 23 publicly-traded U.S. life and health-insurance providers, Bloomberg data show. Prudential, Ameriprise Prudential Financial Inc. of Newark, New Jersey, the second-largest life insurer, and Ameriprise Financial Inc. , the Minneapolis-based financial planning and services firm, command higher valuations, data compiled by Bloomberg show. Primerica lists the two companies among its biggest competitors. Buyers of Primerica’s IPO will own 24 percent of the insurance firm after the offering. They will also be investing alongside New York-based Warburg Pincus LLC, which oversees $30 billion. The private- equity firm agreed to buy 17.2 million shares, or a 23 percent stake, in a private sale at the IPO midpoint price, and warrants to purchase 4.3 million shares at a 20 percent premium. Warburg’s stake may increase to 33 percent if the firm exercises its right to buy additional shares from Citigroup. “It’s a ‘fire sale’ by Citi,” Francis Gaskins , president of IPOdesktop.com in Marina del Rey, California, said in an e- mail. Also, “the IPO investor can get in on the same terms as Warburg. There appears little, if any, risk in this IPO at $13.” Credit Markets All proceeds will go to New York-based Citigroup, which is serving as the lead underwriter for the sale. Primerica is part of Citi Holdings, the collection of businesses that Citigroup’s Pandit said he would sell, wind down or restructure. Pandit is dismantling Weill’s empire after loans and investments tied to the U.S. subprime mortgage market led to $47.6 billion in losses since the last quarter of 2007. Citigroup took a taxpayer-funded bailout after the credit markets froze, Lehman Brothers Holdings Inc. collapsed and Bear Stearns Cos. and Merrill Lynch & Co. were forced to sell themselves. All three companies were based in New York. Weill used Primerica to build Citigroup through a series of acquisitions. In 1992, Primerica bought a 27 percent stake in Travelers, then took over the company a year later for $3.3 billion, keeping Travelers’ name and umbrella logo. The company acquired Salomon in 1997 and in 1998 merged with Citicorp in a $37.4 billion deal to create Citigroup. “This provides an important message that Citi is prepared to shed assets which clearly do not fit the current strategy, even if they have well-known brands,” said Richard Staite , a London-based analyst who covers financial institutions at Atlantic Equities LLP. “It’s a high-profile sale.” To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Craig Trudell in New York at ctrudell1@bloomberg.net ; Michael J. Moore in New York at mmoore55@bloomberg.net .

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MaxLinear Exceeds IPO Price Forecast as Calix Helps U.S. Offerings Recover

March 24, 2010

By Michael Tsang and Craig Trudell March 24 (Bloomberg) — MaxLinear Inc. , a designer of semiconductors, boosted its initial public offering 28 percent as two U.S. companies raised more money in IPOs than originally sought and one sold shares at the high end of its price range. The maker of chips that let people watch television on their mobile devices raised $90.2 million yesterday selling 6.44 million shares at $14 each, Bloomberg data show. Carlsbad, California-based MaxLinear had offered 5.43 million shares at $11 to $13. First Interstate BancSystem Inc. sold $145 million of shares in the first IPO by a U.S. bank since the credit crisis began in 2007, 4.2 percent more than its original terms. Calix Inc., which sells connection equipment to telephone companies, priced its IPO at $13, the high end of its range. The three IPOs come after the Standard & Poor’s 500 Index rose to an 18-month high and Financial Engines Inc., the investment adviser co-founded by Nobel laureate William Sharpe , last week became the first U.S. company this year to sell shares above the price range set by underwriters. The prior 14 transactions were cut by 25 percent on average, according to data compiled by Bloomberg. “That we’re able to even attempt to pull off three companies in a day certainly is a strong signal that the IPO market is regaining its footing,” said Lawrence Creatura , Rochester, New York-based manager at Federated Investors Inc., which oversees $390 billion. For companies to sell shares without discounting “would be considered a victory,” he said. The three offerings made it the busiest day for IPOs since York, Pennsylvania-based Graham Packaging Co., QuinStreet Inc. of Foster City, California, and Generac Holdings Inc. in Waukesha, Wisconsin, sold shares on Feb. 10. One IPO Only one company went public in the four weeks after that. In the past two weeks, three of the four IPOs have priced within or above their forecast range as the S&P 500 extended its rebound from its 2010 low on Feb. 8 to 11 percent. Last week, Palo Alto, California-based Financial Engines had the biggest first-day gain for a U.S. IPO in almost six months after pricing its $127 million offering above the forecast range. The IPOs yesterday showed buyers are willing to pay premiums for shares after the S&P 500 reached the highest level since September 2008. “It’s a good signal,” said Brian Barish , president of Denver-based Cambiar Investors, which oversees $5.5 billion. “There’s a big difference between needing to raise capital because you’re in a tight spot and going public because it’s a good opportunity and you can do so at a good price.” Largest Increase The 28 percent boost in MaxLinear’s deal size from the maximum amount it had sought is the largest increase for a U.S. IPO this year, according to data compiled by Bloomberg. MaxLinear, which originally planned to raise as much as $70.7 million, posted a profit in 2009 for the first time in at least five years as sales increased 64 percent, its filing with the Securities and Exchange Commission showed. At its original midpoint price of $12, the offering would have given MaxLinear a market value of $353 million. That’s 46 times earnings of $7.67 million over a full year, based on income in the most recent quarter, according to its filing and data compiled by Bloomberg. The three biggest publicly listed companies that MaxLinear cites as its main competitors in its SEC filing, Broadcom Corp. of Irvine, California, Analog Devices Inc. in Norwood, Massachusetts, and Sunnyvale, California-based Maxim Integrated Products Inc. , trade at 15.2 times to 21.6 times estimated earnings, according to data compiled by Bloomberg. Morgan Stanley of New York and Frankfurt-based Deutsche Bank AG led MaxLinear’s sale. Bank Deal First Interstate of Billings, Montana, sold 10 million shares at $14.50, after offering 8.7 million shares at $14 to $16, its filing showed. The IPO is the first for a U.S. bank since Houston-based Encore Bancshares Inc.’s initial sale in July 2007, less than a month before the start of the credit crisis that led to almost $1.8 trillion in losses and writedowns at the world’s biggest financial firms, according to Bloomberg data. “A year ago, it would have been laughable for a bank to try and raise money in the public market,” said Federated’s Creatura. First Interstate’s IPO “indicates that there is a new dawn in the banking industry.” The bank estimated the value of shareholders’ equity, excluding assets that can’t be sold in liquidation, would have amounted to $11.23 per share, based on an IPO at midpoint price of $15, its filing showed. That meant the lender asked buyers to pay $1.34 for each dollar of tangible net assets , 30 percent more than the median ratio of 1.03 times for 312 U.S. commercial banks, according to data compiled by Bloomberg. Calix Premium The lender with 72 branches in Montana, Wyoming and South Dakota will use the net proceeds to repay debt and may use the rest to help fund potential acquisitions. First Interstate hired Barclays Plc of London as its lead manager. Calix raised $82.3 million selling 6.33 million shares at $13 each. That’s 36 percent more than the “fair value” of $9.54 a share used by the company’s board of directors when it granted stock options on Feb. 16. Petaluma, California-based Calix became profitable last quarter, posting net income to common stockholders of $2.14 million as revenue rose 25 percent. Calix lost money since it was founded in August 1999. Its products help determine the amount and speed of voice, data and Internet services that customers are able to use. New York-based Goldman Sachs Group Inc. and Morgan Stanley arranged the initial offering for Calix. “Investors no longer think the sky is falling,” said Len Blum , managing partner at Westwood Capital, a New York-based investment-banking firm. “When we have stable or bullish markets, that’s when IPOs get done.” To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Craig Trudell in New York at ctrudell1@bloomberg.net

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Nobel Winner Sharpe’s Firm Climbs After U.S. IPO Priced Above Target Range

March 16, 2010

By Michael Tsang and Craig Trudell March 16 (Bloomberg) — Financial Engines Inc. jumped as much as 32 percent in its first day of trading after the investment adviser co-founded by Nobel laureate William Sharpe became the first U.S. company this year to price an initial public offering above its forecast range. The provider of portfolio-management services to individuals with employer-sponsored retirement plans climbed as high as $15.84 in Nasdaq Stock Market trading in New York after selling 10.6 million shares at $12 each yesterday. The $127 million IPO gave Financial Engines, which offered a 27 percent stake for $9 to $11 a share, a market value of $474 million. Financial Engines commanded a higher price for the offering than its underwriters estimated after the Standard & Poor’s 500 Index rallied to its highest level this year. While the previous 14 sales of 2010 were cut an average of 25 percent, the IPO by Financial Engines showed buyers were willing to pay up for a company that increased revenue by 19 percent last year as the earnings and sales of its biggest competitors fell. “It’s a great sign,” said Darren Fabric , managing director at Chicago-based IPOX Capital Management LLC, which started the Direxion Long/Short Global IPO Fund this month. “It’s definitely encouraging. There’s appetite for companies with growth prospects.” The Dealmakers Sharpe, 75, established Palo Alto, California-based Financial Engines in 1996, six years after winning the Nobel Prize for Economics with Harry Markowitz and Merton Miller for their work in the theory of financial economics. Now a director emeritus, he also developed the Sharpe ratio, a formula to analyze if investments return enough to offset their risks. Goldman Sachs Group Inc. of New York led the initial sale, while Financial Engines turned to Pillsbury Winthrop Shaw Pittman LLP in Palo Alto for legal counsel. At the original midpoint price of $10, Financial Engines was valued at 6.21 times tangible net assets, a discount to its largest rivals. Morningstar Inc. and T. Rowe Price Group Inc., which Financial Engines listed among its competitors for investment advice and retirement savings, trade at 6.82 times and 6.23 times the value of their shareholders’ equity, excluding assets that can’t be sold in liquidation, Bloomberg data show. Investment Simulations Financial Engines , which has about $26 billion in assets under management, generated 62 percent of its revenue last year from overseeing accounts for individuals. Sales from that part of the business rose by 35 percent, according to its filing with the Securities and Exchange Commission. The company runs simulations for each investor to choose blends of stocks, bonds and mutual funds tailored to their tolerance for risk and other financial goals. The analysis is based on the work of Sharpe , now a professor emeritus of finance at Stanford University’s Graduate School of Business. Financial Engines competes with target-date funds offered by T. Rowe Price of Baltimore, which oversees $391.3 billion, and BlackRock Inc. , the New York-based manager that oversees $3.35 trillion. Target-date funds move from riskier investments such as stocks to more conservative alternatives like bonds as an investor approaches retirement. Relative Value T. Rowe’s revenue slid 10 percent last year, while BlackRock posted an 8.1 percent drop. Sales at Chicago-based Morningstar , which Financial Engines cites as a direct competitor for investment-advisory services, fell 4.7 percent. The IPO’s midpoint price valued Financial Engines at about 4.65 times its 2009 sales of $84.98 million, its filing and data compiled by Bloomberg show. That’s lower than Morningstar’s 4.92 price-sales ratio, a 37 percent discount to T. Rowe and 25 percent less than BlackRock, according to data compiled by Bloomberg. Financial Engines was also cheaper than Morningstar and T. Rowe on a free cash flow basis, data compiled by Bloomberg show. “It’s a reasonably established business model that’s shown good growth, and the valuation was reasonable relative to its competitors,” said Sean Kraus , who oversees $2 billion as chief investment officer at Citizens Business Bank in Pasadena, California. “It’s definitely something in the IPO market that you haven’t seen much of.” Baltic Trading, Sensata The sale came after Baltic Trading Ltd. and Sensata Technologies Holding NV priced at the low end of the range set by underwriters last week. The two companies had joined Bellevue, Washington-based Symetra Financial Corp. , the insurer backed by Warren Buffett’s Berkshire Hathaway Inc. that raised $420 million in January, as the only IPOs to sell within the forecast range this year, data compiled by Bloomberg show. Baltic Trading, the New York-based company that will operate dry-bulk vessels, raised $228 million. Sensata , the Almelo, Netherlands-based maker of sensors for Ford Motor Co. of Dearborn, Michigan, sold $569 million in the biggest U.S. offering this year. Film Department Holdings Inc. , the independent film producer making “The Beautiful and the Damned” starring Keira Knightley , has pushed back its IPO from yesterday until at least next week, according to Bloomberg data. The West Hollywood, California-based company is seeking $64.6 million after cutting the size of its deal twice since its December filing. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Craig Trudell in New York at ctrudell1@bloomberg.net .

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AVEO Raises 23% Less Than Sought in First U.S. Biotechnology IPO of 2010

March 12, 2010

By Michael Tsang and Craig Trudell March 12 (Bloomberg) — AVEO Pharmaceuticals Inc. , which is developing a treatment for kidney cancer, sold $81 million of shares in its initial public offering, raising 23 percent less than it sought after delaying its IPO by one day. AVEO offered 9 million shares at $9 each, the Cambridge, Massachusetts-based company said in a release through Business Wire yesterday. AVEO tried to sell as much as $105 million in a 7 million-share deal at $13 to $15 each, its filing with the Securities and Exchange Commission and Bloomberg data showed. U.S. initial offerings have raised just $2.83 billion this year after London-based Barclays Plc predicted in December that sales will triple to $50 billion in 2010. While AVEO was the first biotechnology IPO of the year, the 14 companies that have completed deals cut their size by 25 percent on average as investors extracted concessions in almost every sale. “The buyer has a little more control because there’s a bunch of companies coming public, so we can be picky,” said Scott Billeadeau , who helps oversee about $19 billion at Fifth Third Asset Management in Minneapolis. “The market has come back, but there’s plenty of competition.” AVEO’s offering was the third this week after IPOs by Baltic Trading Ltd. and Sensata Technologies Holding NV. Baltic Trading, the New York-based shipping company formed to operate dry bulk vessels, sold $228 million of shares, while Sensata , the maker of sensors for Ford Motor Co. and controls for Samsung Electronics Co., raised $569 million in the biggest U.S. offering this year. Price Range Both Baltic Trading and Sensata priced their offerings at the low end of their forecast range, becoming only the second and third companies this year to sell shares within the original terms set by their underwriters. Crude Carriers Corp. , the Piraeus, Greece-based company formed in October to engage in crude-oil shipping, also held an IPO yesterday, raising $257 million. The shares, which start trading today on the New York Stock Exchange under the ticker CRU, were sold at $19 each, the low end of its price range. AVEO, which hired JPMorgan Chase & Co. and Morgan Stanley of New York to lead its sale, will begin trading on the Nasdaq Stock Market under the ticker AVEO. The company intends to use the proceeds from the IPO to help fund the clinical trial of a drug called tivozanib, which is in the final stage of testing for U.S. approval in patients with kidney cancer. AVEO has yet to gain clearance for any of its drugs and doesn’t expect to generate revenue from product sales until at least 2013, its filing showed. The drugmaker has accumulated losses of $177.7 million since its founding in 2001. Additional Financing Its auditor, Ernst & Young LLP, said AVEO’s losses raised “substantial doubt” about the company’s ability to continue as a going concern without additional financing by the end of the year, according to the SEC filing. “Buying into any biotech IPO is like purchasing a lottery ticket,” Philip J. Cole , senior advisor at Northbrook, Illinois-based Hochman & Baker Investment Advisors Inc., which oversees $160 million, said in an e-mail. “If you believe they have something that will work, you can make good money.” At the $14 midpoint price of its original 7 million share offering, AVEO estimated the deal would give the company a value of 5.07 times its tangible net assets , a measure of shareholder equity that excludes assets that can’t be sold in liquidation. That’s a 23 percent premium to the median for 268 biomedical and gene companies, Bloomberg data show. ‘Claim to Fame’ AVEO’s tivozanib is known as a VEGF receptor inhibitor, a class of medicines that prevent the production of new blood vessels so tumors don’t grow. The company’s drug selectively blocks all three known VEGF receptors, according to Arie Belldegrun , the director of the Institute of Urologic Oncology at the University of California, Los Angeles, and a researcher at UCLA’s Jonsson Comprehensive Cancer Center. “That’s their claim to fame and why some believe it will work extremely well in kidney cancer specifically,” Belldegrun said. “But in the past three or four years, there have been about five drugs already approved for metastatic kidney cancer. It makes the space very crowded.” New York-based Pfizer Inc.’s Sutent, which generated $964 million in revenue last year, is the most widely used “targeted” medicine for advanced kidney cancer, he said. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Craig Trudell in New York at ctrudell1@bloomberg.net .

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Imperial Capital Shelves IPO, Patriot Risk Delays Offer as Slump Deepens

February 4, 2010

By Michael Tsang, Nikolaj Gammeltoft and Craig Trudell Feb. 4 (Bloomberg) — Imperial Capital Group Inc. postponed the first initial public offering by a U.S. investment bank in two years, while Patriot Risk Management Inc. delayed its share sale as the IPO market’s 2010 slump deepened. Imperial Capital, the Los Angeles-based firm that specializes in high-yield and distressed debt, shelved its $113 million sale yesterday. Patriot Risk , which underwrites workers’ compensation insurance plans, pushed back a $204 million IPO, according to Bloomberg data. A day earlier, Ironwood Pharmaceuticals Inc. cut the size of its deal by 30 percent in the biggest price reduction for a U.S. offering this year. Buyers are extracting concessions on IPOs after two of the first three deals of 2010 fell more than the Standard & Poor’s 500 Index, which slid by the most in a year in January. Imperial Capital was asking investors to pay three times the median so- called tangible book value for investment banks, while Ironwood took a 30 percent discount after trying to sell its shares at 31 percent more than what the company said was its “fair value.” “It is hard for IPOs to carve out a lot of interest in a market that’s been generally frustrating,” said Brian Barish , president of Denver-based Cambiar Investors, which oversees $5.5 billion. “As a portfolio manager, why compound your frustration with these unseasoned offerings? We’ve looked at a couple of IPOs, but we haven’t participated in any meaningful way.” Barish’s $1.07 billion Cambiar Opportunity Fund has beaten 92 percent of rival funds over the past year. 2010 Forecast While Barclays Plc of London estimates that U.S. IPOs will triple this year to $50 billion, Alpharetta, Georgia-based Cellu Tissue Holdings Inc. has lost 13 percent since selling shares at 24 percent less than the price it sought. Chesapeake Lodging Trust in Fairfield, New Jersey, has retreated 5.5 percent since its offering, and Bellevue, Washington-based Symetra Financial Corp.’s deal priced 14 percent below the highest level sought. Terreno Realty Corp. of San Francisco became the first U.S. company to shelve its IPO in 2010 last week as the S&P 500 extended its January slump to 3.7 percent, the biggest monthly drop since the gauge’s 62 percent surge began in March 2009. The biggest U.S. stock-market rally since the 1930s revived deals in the last four months of 2009, with IPOs increasing from the slowest pace on record after the failure of New York-based Lehman Brothers Holdings Inc. froze credit markets. China to Belgium Chinese companies, which accounted for six of the world’s 10 largest IPOs last year, are also accepting lower prices in 2010. China First Heavy Industries Co., a maker of equipment used in the mining and energy industries, yesterday became the first mainland company in at least a year to sell a domestic IPO at less than the highest level sought from investors. Taminco Group NV of Ghent, Belgium, the world’s largest producer of alkylamines, canceled its initial share sale yesterday because of “unfavorable” market conditions. “On the surface, it would appear the market should be working” for IPOs, said Jack Ablin , Chicago-based chief investment officer of Harris Private Bank, which oversees about $55 billion. “Looking under the hood suggests there may be more problems than people realize.” Imperial Capital had estimated in a Feb. 1 filing with the Securities and Exchange Commission that it has a net tangible book value, a measure of shareholder equity that excludes assets that can’t be sold in liquidation, of $3.41 a share. The bank would have been valued at 4.69 times its net tangible assets per share after the offering, assuming an IPO price at $16, the midpoint of the forecast range. That’s more than the median 1.52 times tangible book value of 48 investment banks and brokerages in the U.S., data compiled by Bloomberg show. Patriot Risk, Ironwood Patriot Risk had planned to sell 17 million shares at $10 to $12 each. Net premium revenue at the Fort Lauderdale, Florida-based company fell 12 percent to $28.4 million in the nine months ended Sept. 30, according to its SEC filing. At the midpoint IPO price of $11 a share, Patriot Risk’s existing shareholders stood to make an eightfold profit from the offering, based on the per-share average of $1.31 paid. Ironwood’s common stock had a “fair value” of $12.18 a share, according to models used by the Cambridge, Massachusetts- based drugmaker, its Jan. 20 SEC filing showed. That meant buyers were asked to purchase shares at a premium of 15 percent to 31 percent, Bloomberg data show. The company’s shares gained 3.6 percent to $11.65 yesterday in Nasdaq Stock Market trading. FriendFinder Networks Inc. , the publisher of Penthouse magazine, didn’t announce the pricing of its scheduled $240 million IPO yesterday. The Boca Raton, Florida-based company had planned to sell 20 million shares at $10 to $12 each after delaying its offering last week. The operator of AdultFriendFinder.com has lost money for five straight years. Marc Bell , FriendFinder’s chief executive officer, didn’t respond to e-mail and telephone messages. To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net ; Craig Trudell in New York at ctrudell1@bloomberg.net .

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Tesla Motors, Palo Alto Electric Carmaker, Plans IPO of Up to $100 Million

January 29, 2010

By Michael Tsang Jan. 29 (Bloomberg) — Tesla Motors Inc., the maker of electric sports cars, filed for an initial public offering of shares worth as much as $100 million. The Palo Alto, California-based company run by Elon Musk didn’t disclose in its filing with the Securities and Exchange Commission today how many shares it plans to sell, at what price range or whether its owners intend to sell stakes in the IPO. The company, which makes the electric Roadster, said it may use the proceeds to help pay for spending on factories and equipment, which it estimates may cost as much as $125 million this year. Tesla said it may also use a portion of the IPO proceeds to fund possible acquisitions. The company said it doesn’t have agreements or commitments for specific purchases. Electric cars have been touted by U.S. policy makers including President Barack Obama as a component of the nation’s efforts to reduce oil use and cut dependence on foreign sources. Tesla received a $465 million loan from the U.S. Energy Department on Jan. 21 for factories to make electric vehicles and parts. The low-cost loan was made under a program aimed at speeding production and sales of highly fuel-efficient autos. Tesla will use the IPO and government loan to set up a factory in southern California to assemble the Model S electric sedan and a power-train manufacturing site in Palo Alto. “Obviously, they’re taking advantage of all of the green buzz,” said Joe Phillippi , president of AutoTrends Consulting in Short Hills, New Jersey. “Tesla has to get its sedan launched.” The automaker hired New York-based Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase & Co. and Deutsche Bank AG in Frankfurt as lead underwriters for the sale. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .

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Penthouse Publisher FriendFinder Said to Delay Initial Offer to Next Week

January 27, 2010

By Michael Tsang and Nikolaj Gammeltoft Jan. 27 (Bloomberg) — FriendFinder Networks Inc., the publisher of Penthouse magazine, has pushed back its initial public offering scheduled for today until next week, according to a person familiar with the situation. FriendFinder, the Boca Raton, Florida-based operator of Web sites from AdultFriendFinder.com to Cams.com, had planned to raise as much as $240 million selling 20 million shares at $10 to $12 each today, according to a Jan. 8 filing with the Securities and Exchange Commission and Bloomberg data. Calls and e-mails to FriendFinder’s office were not immediately returned. The delay comes after Terreno Realty Corp. became the first U.S. company to postpone a 2010 IPO this week, Cellu Tissue Holdings Inc. cut its price by 24 percent and Chesapeake Lodging Trust raised 40 percent less than originally sought, Bloomberg data show. FriendFinder has lost money for five straight years and was in default on its debt covenants until October. “FriendFinder looks like an IPO out of necessity rather than opportunity,” Steven M. Rogé , manager at R.W. Rogé & Co. in Bohemia, New York, which has $200 million in assets, said before the delay. “A lot of companies have an IPO to get cash to grow. Whatever cash FriendFinder can raise is going straight to their creditors.” While U.S. IPOs are forecast to triple according to London based Barclays Plc, 2010’s first offers show buyers are wary of new deals after almost 40 percent of deals in the second half of 2009 left investors with losses. S&P 500 FriendFinder was offering shares after the Standard & Poor’s 500 Index fell the most since October last week. The publisher, which also runs so-called general audience social networking venues from SeniorFriendFinder.com to BigChurch.com, got about 70 percent of its revenue from its adult-themed Web sites in the first nine months of 2009, according to the SEC regulatory filing. The company was selling a 49 percent stake and planned to use the proceeds to pay down debt. After the offering, it would have $5.24 million in cash compared with $286 million in debt. FriendFinder’s sales would have declined 1.5 percent in 2009 from a year ago, based on $244 million in revenue generated in the first nine months of the year. Sales from both its adult- themed and general audience sites fell during the nine-month period from a year ago, while interest expenses exceeded operating profit by 66 percent. ‘Biggest Concern’ “The biggest concern is just the fact that it’s got a lot of debt and really hasn’t grown,” said Nick Einhorn , an analyst at Greenwich, Connecticut-based Renaissance Capital LLC, which has followed IPOs since 1991. The firm isn’t affiliated with FriendFinder’s lead underwriter of the same name. “Companies that have lots of debt and slowed growth have really not been attractive for investors,” he said before the delay. Playboy Enterprises Inc. , the owner of the namesake men’s magazine, had operating income equal to 1.02 times interest expenses of $4.46 million in 2008 as the Chicago-based company posted its biggest annual loss since at least 1987. FriendFinder has also lost about as many fee-paying subscribers from its adult-themed Web sites as it has gained in each of the past four years. It had breached loan agreements in such areas as failing to deliver certified annual financial statements, missing certain sales targets for the films that it produced and distributed and not keeping senior debt below certain levels. Renaissance Capital of Moscow and Ledgemont Capital Group LLC in New York are the lead underwriters for FriendFinder. Neither firm was credited with arranging any U.S. company IPOs last year, according to Bloomberg league tables. To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net .

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Citigroup Shares Decline After U.S. Treasury Decides to Delay Stake Sale

December 17, 2009

By Michael J. Moore and Michael Tsang Dec. 17 (Bloomberg) — Citigroup Inc. fell as much as 9.3 percent in New York trading after the U.S. Treasury Department delayed selling its stake in the bank following a $17 billion new-stock deal. Citigroup fell 23 cents, or 6.7 percent, to $3.22 at 10:56 a.m. on the New York Stock Exchange, the biggest decline since Sept. 15. The bank sold 5.4 billion shares at $3.15 apiece yesterday, less than the $3.25 the government paid when it acquired a one-third stake in the New York-based bank in September. Citigroup said Treasury won’t sell any of its shares for at least 90 days. Investors demanded a bigger discount from Citigroup than Bank of America Corp. or Wells Fargo & Co. , which together raised more than $31 billion this month to exit the Troubled Asset Relief Program. Wells Fargo, which trumped Citigroup Chief Executive Officer Vikram Pandit ’s bid to buy Wachovia Corp. last year, leapfrogged its rival by completing a $12.25 billion share sale Dec. 15. JPMorgan Chase & Co. repaid $25 billion in June. “The market cast its vote and they’re low down on the ballot,” said Douglas Ciocca , a managing director at Renaissance Financial Corp. in Leawood, Kansas. “Citigroup needs to show steps to reinstall the quality of the brand.” With the sale, Citigroup’s common shares outstanding increased to 28.3 billion. That’s up from 22.9 billion as of Sept. 30 and 5 billion at the end of 2007. “More shares outstanding means less value per share,” said Edward Najarian , an analyst at International Strategy and Investment Group in New York, who has a “hold” rating on the shares. “The whole structure of their deal to pay back TARP wasn’t very good for common shareholders and that is being reflected in the pricing.” Price Discount The $3.15 price on the new shares was a 20 percent discount from the closing price on Dec. 11, before Citigroup announced the plan to repay TARP. “Wells Fargo proved they can execute better,” said Michael Johnson , chief market strategist at M.S. Howells & Co., a Scottsdale, Arizona-based broker-dealer. Pandit, 52, is “sitting on one of the best investment banks in the world and Wells, which really doesn’t have an investment bank, still outperforms him,” Johnson said. The government decided not to participate in the equity offering based on the pricing of the shares, according to a Treasury official. The U.S. expects to divest its ownership stake in Citigroup shares during the next 12 months, the official said. Equity Units The bank said it also raised $3.5 billion by selling “tangible equity units,” securities that make quarterly payments of 7.5 percent a year and include a requirement to buy Citigroup shares in 2012. The total of $20.5 billion was the largest public equity offering in the history of U.S. capital markets, according to Citigroup. Citigroup’s Dec. 15 announcement that Abu Dhabi Investment Authority was trying to abort an accord to buy $7.5 billion of Citigroup stock may also have hurt confidence in the bank’s secondary stock offering, said Blake Howells , an analyst at Becker Capital Management in Portland, Oregon. Abu Dhabi “certainly couldn’t help,” Howells said. Citigroup said earlier this week that it would sell at least $20.5 billion of equity and debt to exit TARP. After that announcement, the Treasury said it would sell as much as $5 billion of its stake, in conjunction with the bank’s secondary offering, with the rest to be sold over the next year. Treasury’s Stake The Treasury holds $25 billion in common stock in Citigroup, along with a $20 billion preferred equity stake and further preferred shares granted in connection with an asset- guarantee agreement. At the offering price of $3.15, the 7.7 billion shares are valued about $770 million less than the Treasury’s cost. Bank of America, the largest U.S. lender, raised its funds on Dec. 3. The Charlotte, North Carolina-based bank, which yesterday named Brian Moynihan as its new chief executive officer, sold 1.286 billion so-called common equivalent securities at $15 each, a 4.8 percent discount to its closing price that day. Wells Fargo, whose largest shareholder is billionaire investor Warren Buffett’s Berkshire Hathaway Inc., completed its sale at a 1.9 percent discount. To contact the reporters on this story: Michael Moore in New York at mmoore55@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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Citigroup Stock Sale Discount Prompts Treasury to Delay Disposal of Stake

December 17, 2009

By Michael J. Moore and Michael Tsang Dec. 17 (Bloomberg) — Citigroup Inc. , the last of the four largest U.S. banks to seek funds to exit a taxpayer bailout, raised $17 billion by selling stock for a price so low that the U.S. delayed plans to shrink its one-third stake in the lender. Citigroup sold 5.4 billion shares at $3.15 apiece, less than the $3.25 the government paid when it acquired its stake in September. The New York-based bank said the Treasury won’t sell any of its shares for at least 90 days. Investors demanded a bigger discount from Citigroup than Bank of America Corp. or Wells Fargo & Co. , which together raised more than $31 billion this month to exit the Troubled Asset Relief Program. Wells Fargo, which trumped Citigroup Chief Executive Officer Vikram Pandit ’s bid to buy Wachovia Corp. last year, leapfrogged its rival by completing a $12.25 billion share sale Dec. 15. JPMorgan Chase & Co. repaid $25 billion in June. “The market cast its vote and they’re low down on the ballot,” said Douglas Ciocca , a managing director at Renaissance Financial Corp. in Leawood, Kansas. “Citigroup needs to show steps to reinstall the quality of the brand.” With the sale, Citigroup’s common shares outstanding increased to 28.3 billion. That’s up from 22.9 billion as of Sept. 30 and 5 billion at the end of 2007. “More shares outstanding means less value per share,” said Edward Najarian , an analyst at International Strategy and Investment Group in New York, who has a “hold” rating on the shares. “The whole structure of their deal to pay back TARP wasn’t very good for common shareholders and that is being reflected in the pricing.” Price Discount The lender’s shares fell 30 cents, or 8.7 percent, to $3.15 in New York trading at 6:52 a.m. The $3.15 price on the new shares is a 20 percent discount from the closing price on Dec. 11, before Citigroup announced the plan to repay TARP. “Wells Fargo proved they can execute better,” said Michael Johnson , chief market strategist at M.S. Howells & Co., a Scottsdale, Arizona-based broker-dealer. Pandit, 52, is “sitting on one of the best investment banks in the world and Wells, which really doesn’t have an investment bank, still outperforms him,” Johnson said. The government decided not to participate in the equity offering based on the pricing of the shares, according to a Treasury official. The U.S. expects to divest its ownership stake in Citigroup shares during the next 12 months, the official said. Equity Units The bank said it also raised $3.5 billion by selling “tangible equity units,” securities that make quarterly payments of 7.5 percent a year and include a requirement to buy Citigroup shares in 2012. The total of $20.5 billion was the largest public equity offering in the history of U.S. capital markets, according to Citigroup. Citigroup’s Dec. 15 announcement that Abu Dhabi Investment Authority was trying to abort an accord to buy $7.5 billion of Citigroup stock may also have hurt confidence in the bank’s secondary stock offering, said Blake Howells , an analyst at Becker Capital Management in Portland, Oregon. Abu Dhabi “certainly couldn’t help,” Howells said. Citigroup said earlier this week that it would sell at least $20.5 billion of equity and debt to exit TARP. After that announcement, the Treasury said it would sell as much as $5 billion of its stake, in conjunction with the bank’s secondary offering, with the rest to be sold over the next year. Treasury’s Stake The Treasury holds $25 billion in common stock in Citigroup, along with a $20 billion preferred equity stake and further preferred shares granted in connection with an asset- guarantee agreement. At the offering price of $3.15, the 7.7 billion shares are valued about $770 million less than the Treasury’s cost. Bank of America, the largest U.S. lender, raised its funds on Dec. 3. The Charlotte, North Carolina-based bank, which yesterday named Brian Moynihan as its new chief executive officer, sold 1.286 billion so-called common equivalent securities at $15 each, a 4.8 percent discount to its closing price that day. Wells Fargo, whose largest shareholder is billionaire investor Warren Buffett’s Berkshire Hathaway Inc., completed its sale at a 1.9 percent discount. To contact the reporters on this story: Michael Moore in New York at mmoore55@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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U.S. Treasury Delays Sale of Citigroup Stake as Shares Priced at Discount

December 16, 2009

By Michael J. Moore and Michael Tsang Dec. 16 (Bloomberg) — The U.S. Treasury Department delayed the sale of its stake in Citigroup Inc. after the bank raised $17 billion by selling shares at a price below what the government paid. Citigroup sold 5.4 billion shares at $3.15 apiece, less than the $3.25 the government paid when it acquired a one-third stake in the New York-based bank in September. The bank said Treasury won’t sell any of its shares for at least 90 days. The price was 8.7 percent below its closing price today, a bigger discount than those offered by Bank of America Corp. and Wells Fargo & Co. , which together raised more than $31 billion this month to exit the Troubled Asset Relief Program. “It’s obviously disappointing,” said Edward Najarian , an analyst at International Strategy and Investment Group in New York, who has a “hold” rating on the shares. “The whole structure of their deal to pay back TARP wasn’t very good for common shareholders and that is being reflected in the pricing.” The bank said it also raised $3.5 billion by selling “tangible equity units,” securities that make quarterly payments of 7.5 percent a year and include a requirement to buy Citigroup shares in 2012. Citigroup said earlier this week that it would sell at least $20.5 billion of equity and debt to exit TARP. After that announcement, the Treasury said it would sell as much as $5 billion of its stake, in conjunction with the bank’s secondary offering, with the rest to be sold over the next year. Shares Fall The lender’s shares fell 25 cents, or 7.2 percent, to $3.20 at 7:45 p.m. in New York. The $3.15 price is a 20 percent discount from the closing price on Dec. 11, before Citigroup announced the plan to repay TARP. “The market is dictating the terms, and the terms aren’t Favorable,” said Douglas Ciocca , who oversees almost $2 billion at Renaissance Financial Corp. in Leawood, Kansas. “You can’t say the market is wrong. The market cast its vote and they’re low down on the ballot.” The Treasury holds $25 billion in common stock in Citigroup, along with a $20 billion preferred equity stake and further preferred shares granted in connection with an asset- guarantee agreement. Bank of America, the largest U.S. lender, raised its funds on Dec. 3. The Charlotte, North Carolina-based bank sold 1.286 billion so-called common equivalent securities at $15 each, a 4.8 percent discount to its closing price that day. San Francisco-based Wells Fargo, which trumped Citigroup’s bid to buy Wachovia Corp. last year, leapfrogged its rival by completing its $12.25 billion share sale yesterday. Wells Fargo, whose largest shareholder is billionaire investor Warren Buffett’s Berkshire Hathaway Inc., made its plan public hours after Citigroup’s announcement and completed the sale the following day at a 1.9 percent discount. To contact the reporters on this story: Michael Moore in New York at mmoore55@bloomberg.net Michael Tsang in New York at mtsang1@bloomberg.net .

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Carlyle, Goldman Seek $1 Billion IPO for Oil Company With No Sales, Profit

December 11, 2009

By Michael Tsang and Jim Polson Dec. 11 (Bloomberg) — Carlyle Group and Goldman Sachs Group Inc. are asking investors to pay more than $1 billion for a deepwater-oil explorer with no revenue or profits in the industry’s biggest U.S. initial public offering this decade. Cobalt International Energy Inc., founded in 2005 and controlled by private-equity funds of Carlyle, Goldman Sachs and three other firms, plans to offer 63 million shares at $15 to $17 each, a Nov. 27 filing with the U.S. Securities and Exchange Commission showed. The IPO, scheduled for Dec. 15, may raise as much as $1.1 billion and give buyers a 19 percent stake in the Houston-based company, data compiled by Bloomberg show. The offer by Cobalt, which has yet to produce any oil from its deepwater fields in the Gulf of Mexico and off the coasts of Angola and Gabon, comes after sellers used the 64 percent gain in the Standard & Poor’s 500 Index since March to raise more than $10 billion in the past three months. Cobalt’s IPO will show whether investors are willing to pay 61 percent more than the median U.S. oil explorer’s so-called tangible net assets for a company that doesn’t expect to generate any revenue from oil production for at least two more years. “If you hit something, it’s good, and if you don’t hit something, it’s not good,” said Jim Glickenhaus , a partner in investment firm Glickenhaus & Co. in New York, which has about $1.5 billion in assets, including shares of offshore explorers. “The smaller they are, the bigger the effect, both positive and negative that a discovery or a dry hole can happen.” Private Equity The oil explorer is one of four U.S. companies that may raise a total of as much as $1.87 billion in IPOs next week, data compiled by Bloomberg show. Three of the four — Cobalt, Knoxville, Tennessee-based Team Health Holdings Inc. and Kraton Performance Polymers Inc. in Houston — are controlled by private-equity funds. Ellington Financial LLC, run by Michael Vranos’s hedge-fund firm, yesterday became the sixth U.S. company to shelve its offering in the past six weeks, as investors refused to finance the Old Greenwich, Connecticut-based company’s plan to buy bonds backed by the type of home loans that helped spur the biggest housing bust since the Great Depression. Credit Suisse Group AG of Zurich and New York-based Goldman Sachs and JPMorgan Chase & Co. will serve as the lead underwriters for Cobalt’s sale. The offering would exceed Oklahoma City-based SandRidge Energy Inc.’s $842 million IPO as the largest by a U.S. oil and gas exploration company this decade, data compiled by Bloomberg show. Tangible Book Value Cobalt estimates it will have a so-called tangible book value, a measure of shareholder equity that excludes assets that can’t be sold in liquidation, of $5.69 per share, after the offering and assuming an IPO price of $16, the filing shows. At that price, the shares would be valued at 2.81 times, higher than the median of 1.74 times tangible net assets for 150 U.S.-listed oil and gas exploration companies, which include those that have fields with proven reserves, according to data compiled by Bloomberg. The IPO also implies a so-called enterprise value, or the sum of its stock and debt minus cash, of 2.2 times Cobalt’s tangible book value, according to Francis Gaskins , president of IPODesktop.com in Marina del Rey, California. That’s more expensive than the 1.9 times multiple that investors pay for Anadarko Petroleum Corp. , the exploration company located in The Woodlands, Texas, that has reported five oil discoveries in deep waters of the Gulf of Mexico this year. Cobalt has stakes in two of those discoveries. Drilling and Exploration Cobalt intends to use the proceeds from the IPO to fund drilling and exploration through 2011. The company expects to start producing oil and generating revenue from its Gulf of Mexico fields between 2012 and 2014, the filing showed. Cobalt also specializes in deepwater exploration beneath salt domes, which tend to obscure rock formations from geologists using conventional seismic equipment. Shares of Rio de Janeiro-based Petroleo Brasileiro SA , Brazil’s state-owned oil company, slid in July after its U.S. partner, Irving, Texas-based Exxon Mobil Corp., said it failed to find oil in a so-called pre-salt well off Brazil. “There’s a lot of risk no matter how you look at it,” said Nick Einhorn , a Greenwich, Connecticut-based analyst at Renaissance Capital LLC, which has specialized in IPO research since 1991. How much investors will be willing to pay for a slice of Cobalt’s future earnings hinges on their confidence in Chief Executive Officer Joseph Bryant , according to Mark Gilman , New York-based oil and natural-gas analyst at The Benchmark Co. BP, Chevron Bryant joined Cobalt after a career that included running offshore operations in Angola for London-based BP Plc , Europe’s second-largest oil company. He also served as president of El Segundo, California-based Unocal Corp. before its acquisition by Chevron Corp. , the second-biggest U.S. energy producer and located in San Ramon, California, in 2005. His credibility is bolstered by the company’s joint venture with Paris-based Total SA , Europe’s third-largest oil producer, which makes Cobalt a 60 percent owner and operator on deepwater Gulf of Mexico leases of both companies, according to Gilman. “I’d be willing to pay more for exploration because the whole thing has Joe Bryant’s name on it,” Gilman said. The joint venture means that Total is saying, “we believe in Joe Bryant,’” he said. The private-equity firms that control Cobalt aren’t cashing out either. Funds controlled by Carlyle, the Washington-based private-equity firm with about $88 billion in assets under management, and New York-based Riverstone Holdings LLC own about 27 percent of Cobalt, while Goldman Sachs and First Reserve Corp. of Greenwich, Connecticut, each have 27 percent stakes, the filing showed. ‘Big Money Maker’ They stand to profit the most if their investment pays off. Existing owners paid on average $4.65 a share for Cobalt, whose fortunes may mimic those of OGX Petroleo e Gas Participacoes SA , the oil company controlled by billionaire Eike Batista , according to Renaissance Capital’s Einhorn. The oil explorer located in Rio de Janeiro raised $4.09 billion in June 2008 in what was then Brazil’s largest ever IPO. Shares of OGX, which had yet to start drilling or producing oil when it went public, plummeted almost 80 percent to its low in November last year before surging more than sixfold as the company announced successive oil discoveries. Cobalt is “as risky an IPO as you’ll see, with a similar return potential,” Einhorn said. “No question it could be a big money maker, but there’s a question of whether it will be.” To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net . Jim Polson in New York at jpolson@bloomberg.net .

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Bank of America Raises $19.3 Billion in Biggest U.S. Stock Sale Since 2000

December 3, 2009

By Michael Tsang and David Mildenberg Dec. 4 (Bloomberg) — Bank of America Corp., the largest U.S. lender, raised $19.3 billion in a sale of securities at $15 apiece in the biggest sale of stock or preferred shares by a U.S. public company since at least 2000. The bank, which plans to repay $45 billion of U.S. rescue funds, sold 1.286 billion so-called common equivalent securities, according to Bloomberg data. The security is made up of one depositary share and one warrant and is convertible into one common share , subject to stockholder approval, according to a regulatory filing by the Charlotte, North Carolina-based bank. Bank of America plans to use the proceeds to free itself from government restrictions after accepting funds from the Troubled Asset Relief Program. Banks, brokerages and insurers have raised $1.5 trillion to shore up capital after the biggest financial crisis since the Great Depression spurred more than $1.7 trillion in writedowns and credit losses globally. “It’s a good thing for Bank of America, it’s a healthy thing and it needs to happen,” said Jason Brady , a managing director of Santa Fe, New Mexico-based Thornburg Investment Management, whose $4 billion Thornburg Income Builder Fund owns Bank of America bonds. “It doesn’t mean necessarily that Bank of America stock is a wonderful investment because they spent a bunch of money to get the government out of the way.” In May, Bank of America raised $13.5 billion issuing 1.25 billion common shares at $10.77 each in response to government stress tests and to help cushion losses tied to the takeover of Merrill Lynch & Co. The tests gauged the ability of banks to absorb losses in an extended recession, prompting Bank of America to boost capital by almost $40 billion. Succession Battle The repayment may ease efforts to replace Chief Executive Officer Kenneth D. Lewis , who’s leaving the bank Dec. 31. His successor inherits a company ranked first by assets and deposits in the U.S. The plan saves billions of dollars in TARP dividends and ends extra U.S. oversight of operations and salaries, Wells Fargo Advisors analyst Matthew Burnell wrote. “Repaying TARP is going to allow a lot more flexibility for the incoming CEO as he handpicks his individual management team,” said Todd Hagerman , an analyst in New York with Collins Stewart Plc , who has a “buy” rating on Bank of America. Bank of America rose 11 cents to $15.76 yesterday after advancing as much as 7 percent. Michael Mayo of Calyon Securities USA Inc. raised his rating to “outperform” from “underperform” and boosted his target to $19 from $12, which had been the lowest among analysts surveyed by Bloomberg. The bank plans to repay the U.S. using $26.2 billion of cash and the proceeds from the share sale, according to a statement. It expects to increase equity by $4 billion through asset sales and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees. Wells Fargo & Co ., based in San Francisco, raised $8.6 billion in May in a secondary offering, while Goldman Sachs Group Inc. sold $5.75 billion in shares in April. Wells Fargo accepted $25 billion in TARP funds last year. Goldman has repaid $10 billion received through the program. To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; David Mildenberg in Charlotte at dmildenberg@bloomberg.net

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Bank of America Raises $19.3 Billion to Help Repay U.S. Government Bailout

December 3, 2009

By Michael Tsang Dec. 3 (Bloomberg) — Bank of America Corp., which plans to repay $45 billion of U.S. government bailout money, raised $19.3 billion in a sale of securities at $15 apiece, a 4.8 percent discount to its common stock. The Charlotte, North Carolina-based lender sold 1.286 billion so-called common equivalent securities, according to Bloomberg data. The security, which is made up of one depositary share and one warrant, is convertible into one common share , subject to stockholder approval, a regulatory filing before the sale showed. Bank of America’s common stock rose 0.7 percent today to $15.76 in New York Stock Exchange composite trading. The sale is part of Bank of America’s plan to free itself from government restrictions after accepting funds from the Troubled Asset Relief Program. Banks, brokerages and insurers have raised $1.5 trillion to shore up capital after the biggest financial crisis since the Great Depression spurred more than $1.7 trillion in writedowns and credit losses globally. In May, Bank of America raised $13.5 billion issuing 1.25 billion common shares in response to the government’s stress tests and to help cushion losses tied to its takeover of Merrill Lynch & Co. “It’s a good thing for Bank of America, it’s a healthy thing and it needs to happen,” said Jason Brady , a managing director of Santa Fe, New Mexico-based Thornburg Investment Management, whose $4 billion Thornburg Income Builder Fund owns Bank of America bonds. “It doesn’t mean necessarily that bank of America stock is a wonderful investment because they spent a bunch of money to get the government out of the way.” Succession Battle The repayment may ease efforts to replace CEO Kenneth D. Lewis , who’s leaving the bank Dec. 31. His successor inherits a company ranked first by assets and deposits in the U.S. The plan saves billions of dollars in TARP dividends and ends extra U.S. oversight of operations and salaries, Wells Fargo Advisors analyst Matthew Burnell wrote today. Bank of America rose 11 cents to $15.76 today after advancing as much as 7 percent. Michael Mayo of Calyon Securities USA Inc. raised his rating to “outperform” from “underperform” and boosted his target to $19 from $12, which had been the lowest among analysts surveyed by Bloomberg. The bank plans to repay the U.S. using $26.2 billion of cash and the proceeds from today’s sale, according to a statement. The firm also plans to increase equity by $4 billion through asset sales and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .

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Sands China Raises $2.5 Billion in Hong Kong Offering at Low End of Range

November 20, 2009

By Chia-Peck Wong and Michael Tsang Nov. 21 (Bloomberg) — Sands China Ltd. and its parent, the casino company controlled by billionaire Sheldon Adelson , raised HK$19.4 billion ($2.5 billion) in a Hong Kong share sale conducted at the low end of its forecast range. A total of 1.87 billion shares were sold at HK$10.38 each, compared with the HK$10.38 to HK$13.88 that the company sought, according to Bloomberg data. Sands joins Wynn Macau Ltd. in selling shares in Hong Kong after other casino operators surged this year. Las Vegas Sands Corp.’s shares surged 176 percent this year, after dropping 94 percent in 2008. Sands China’s share of the proceeds, together with $1.75 billion in bank financing, will help it resume construction of the 13.3 million square foot (1.24 million square meters) casino-resort that was halted in November 2008 after credit markets seized up and revenue dwindled . The completion of the project will help strengthen Adelson’s challenge to 87-year-old magnate Stanley Ho , who controls SJM Holdings Ltd., the biggest casino operator by market share in Macau, the world’s largest gambling hub. Adelson, 76, is betting that more convention space, hotel beds and shopping malls will entice visitors to stay longer in the world’s biggest gambling hub. To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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Sands China IPO Seeking $3.4 Billion at Highest Casino Valuation Worldwide

November 20, 2009

By Michael Tsang Nov. 20 (Bloomberg) — Sands China Ltd., the Macau casino unit controlled by billionaire Sheldon Adelson , is set to raise as much as HK$26 billion ($3.4 billion) in Hong Kong’s biggest initial public offering this year at a higher valuation than investors pay for any casino resort in the world. Sands China plans to sell 1.87 billion shares as early as tomorrow, giving the company a market capitalization of about HK$110 billion based on the high end of its range of HK$10.38 to HK$13.88 each, according to a regulatory filing. The IPO also implies a so-called enterprise value, the sum of its stock and debt minus cash, of 16.6 times next year’s earnings before interest, taxes, depreciation and amortization, according to terms of the sale sent to investors. That’s more expensive than 23 casino-hotel operators tracked by Bloomberg globally and double the average valuation for the industry. The sale will add to the busiest period for Hong Kong IPOs in almost two years as investors captivated by China, the only economy among the world’s 10 largest that’s projected to grow this year, seek to tap into the biggest overseas market for mainland companies. While almost half of U.S. IPOs since September have fallen below their offer prices, those in Hong Kong climbed an average of 27 percent in the first month of trading, data compiled by Bloomberg show. Sands China and other Macau IPOs offer “exciting opportunities, but they don’t look particularly attractive,” said Pauline Dan , Hong Kong-based chief investment officer at Samsung Investment Trust Management, which oversees $100 billion. “No doubt we’ll be able to buy at a lower price. So there’s really no need to get into the IPO.” Barclays, Cloud Peak Goldman Sachs Group Inc. and Citigroup Inc. of New York, Barclays Plc in London, Paris-based BNP Paribas SA and Zurich- based UBS AG are serving as underwriters for the sale. The pace of U.S. offerings will slow next week, with none scheduled before the Thanksgiving holiday, according to Bloomberg data. London-based Rio Tinto Group’s Cloud Peak Energy Inc. coal unit capped a week with four IPOs yesterday, raising $459 million by selling shares below the range of $16 to $18 each that the Gillette, Wyoming-based company originally sought. In Hong Kong, companies are taking advantage of a doubling in the benchmark Hang Seng Index , rising property prices and signs of increasing wealth to sell shares. The rally has restored $1.3 trillion to the value of the territory’s equities. Las Vegas Sands Sands China, the unit of Las Vegas Sands Corp. that operates in the world’s largest gaming hub, will be the 12th Hong Kong IPO in November, data compiled by Bloomberg show. The sale will add to a tally of companies that have raised money through IPOs on the Hong Kong stock exchange in the prior two months, when 19 companies went public. The last time there were more initial sales was in the fourth quarter of 2007, data compiled by Bloomberg show. Sands China’s sale is scheduled to price as soon as Nov. 21 and no later than Nov. 27, its regulatory filing showed. The company will receive about 68 percent of the IPO proceeds, or about $2.2 billion before expenses, while those controlled by Adelson get the rest. Sands China follows Wynn Macau Ltd. in selling stock to public investors as operators of casino resorts globally rose an average 172 percent this year. Sands China is valued at 13.5 times to 16.6 times estimated 2010 Ebitda of $940 million, according to terms for the sale the underwriters sent to prospective buyers on Nov. 10. The high end of the valuation range is twice the average of 8 times 2010 estimated Ebitda of 23 operators of casino hotels worldwide, data compiled by Bloomberg show. Wynn Macau, SJM Holdings Wynn Macau , the casino company led by billionaire Stephen Wynn that sold shares in a HK$12.6 billion IPO in Hong Kong in September, is valued at 14 times 2010 estimated Ebitda, according to data compiled by Bloomberg. SJM Holdings Ltd., Macau’s biggest casino operator by market share and controlled by Stanley Ho , trades for 6.6 times next year’s Ebitda, according to data compiled by Bloomberg. The lead underwriters’ consensus 2010 estimates for net income values Sands China at 28.1 times to 37.1 times, the sale document showed. That’s more than double the industry median of 16.3 times 2010 earnings, data compiled by Bloomberg show. The offerings since September in Hong Kong have beaten the Hang Seng by 24 percentage points on average in the first month of trading. U.S. company IPOs in September and October trailed the Standard & Poor’s 500 Index by 1 percentage point. That’s the worst performance since at least 1995 as the U.S. economy struggles to emerge from the worst recession since the Great Depression, data compiled by Bloomberg show. ‘Market Conditions’ Two of the five U.S. companies that planned IPOs this week were forced to take less than the prices sought to attract enough buyers. Alpharetta, Georgia-based HealthPort Inc. postponed its sale due to “market conditions.” The developer of software used to manage medical records electronically became the fourth U.S. company in three weeks to shelve its IPO, data compiled by Bloomberg show. “It’s easier to do an IPO when you can say, ‘Hey the economy is growing and we’re doing very well,” said Jeff Papp , senior analyst at Lisle, Illinois-based Oberweis Asset Management Inc., which oversees $800 million. The firm purchased shares in the IPO of Shenyang, northeastern China-based Sany Heavy Equipment International Holdings Co., which is scheduled to start trading next week. “If you come to the states, the macro backdrop isn’t as favorable.” Longfor Climbs Longfor Properties Co., the biggest developer in the southwestern Chinese city of Chongqing, advanced 13 percent in its first day of trading yesterday after raising HK$6.7 billion. Billionaire investor George Soros purchased HK$200 million, while China Investment Corp., the country’s sovereign wealth fund, also bought shares, Reuters said Nov. 12. China Minsheng Banking Corp., the nation’s first privately- owned lender, is also set to begin trading next week in Hong Kong. The bank, which is listed in Shanghai, raised $3.9 billion in a secondary offering yesterday, Hong Kong’s biggest public sale of shares since April 2007. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .

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KKR’s Dollar General IPO Increases to $824 Million on Underwriters’ Option

November 13, 2009

By Michael Tsang Nov. 13 (Bloomberg) — Dollar General Corp.’s initial public offering increased to $824 million after its underwriters exercised an option to buy 5.12 million more shares from the retailer’s owners, including KKR & Co., Bloomberg data show. The Goodlettsville, Tennessee-based merchant and its stakeholders raised $716 million in its IPO yesterday after selling 34.1 million shares at $21 each, the low end of the range it sought. None of the $107 million in proceeds from the so-called greenshoe will go to Dollar General, according to regulatory filings. Citigroup Inc., Goldman Sachs Group Inc. and KKR of New York, among Dollar General’s biggest shareholders, served as lead underwriters for the IPO, along with Charlotte, North Carolina-based Bank of America Corp.’s investment banking unit Merrill Lynch & Co. and New York-based JPMorgan Chase & Co. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .

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Hyatt’s IPO Seeking as Much as $1.14 Billion Said to Be Moved Up to Today

November 4, 2009

By Nadja Brandt and Michael Tsang Nov. 4 (Bloomberg) — Hyatt Hotels Corp.’s initial public offering of as much as $1.14 billion in stock was moved to today, according to two people familiar with the matter, after two U.S. IPOs were postponed in the past week. The Chicago-based hotel chain’s IPO was originally set to price tomorrow, said the people, who declined to be identified because the discussions are private. Underwriters for Hyatt including Goldman Sachs Group Inc. are seeking $23 to $26 each for 38 million shares the founding Pritzker family is selling, according to a regulatory filing. Underwriters also have an option to buy an additional 5.7 million shares. The offering would be the first of November and the third- largest for an American company this year, Bloomberg data show. The sale follows the busiest two-month period for U.S. IPOs since December 2007 to January 2008, according to the data. The revival for U.S. IPOs hasn’t coincided with bigger returns. The offerings of American companies since September through yesterday outperformed the Standard & Poor’s 500 Index by 0.5 percentage point on average in the first month of trading, the worst performance in Bloomberg data going back 14 years. IPOs by U.S. companies have beaten the S&P 500 by an average 21.3 percentage points since 1995, the data show. ‘So Uncertain’ “The deal from what I have heard was oversubscribed,” said Todd Jordan , managing director at New Haven, Connecticut- based Research Edge LLC. “I think they felt ‘lets get this deal done. Times are so uncertain, why wait.’” Aviv REIT Inc. , the Chicago-based real-estate investment trust that operates nursing homes in 21 U.S. states, yesterday became the second U.S. company in less than a week to pull its IPO. The postponement came just five days after bankers were forced to shelve an $800 million offering by George Town, Cayman Islands-based AEI after they couldn’t find enough buyers for the former overseas unit of Enron Corp. Goldman Sachs and JPMorgan Chase & Co. in New York and Frankfurt-based Deutsche Bank AG are the lead underwriters for Hyatt’s offering. The change of the date for pricing was previously reported by Reuters. Goldman Sachs and JPMorgan, along with New York-based Citigroup Inc. and Credit Suisse Group AG in Zurich, ran the AEI sale . New York-based Morgan Stanley, Citigroup and Charlotte, North Carolina-based Bank of America Corp.’s Merrill Lynch & Co. unit were the lead underwriters for Aviv’s IPO. Marriott, Starwood Hyatt, which would be the third-largest publicly traded U.S. hotel chain based on 2008 sales, had a net loss of $31 million in the nine months ended Sept. 30, as revenue fell 17 percent to $2.4 billion, according to a regulatory filing. Marriott International Inc., the biggest U.S. hotel chain, had a loss of $452 million from revenue of $7.53 billion in the same period. Starwood Hotels & Resorts Worldwide Inc., the second-largest, earned $268 million on sales of $3.56 billion. Hyatt had $845 million in long-term debt versus $1.3 billion in cash at the end of the third quarter, according to its regulatory filing. At Marriott, long-term debt totaled $2.52 billion , while the Bethesda, Maryland-based company had $130 million in reserves, data compiled by Bloomberg show. White Plains, New York-based Starwood’s long-term borrowings equaled $3.36 billion and it had $113 million in cash. ‘Well Received’ “The decision to move the pricing reflects that this IPO has been well received,” said William Crow , a St. Petersburg, Florida-based analyst at Raymond James and Associates Inc. Hyatt has “a global franchise and management business and should continue to grow as the economy recovers. They don’t have any financial or balance sheet issues. That’s all a plus.” Hyatt set up two classes of shares that give the Pritzker family more voting power than other shareholders, according to regulatory filings. The family will own about 80.7 percent of the company’s Class B common stock, representing about 62.4 percent of shares outstanding and 78.4 percent of total voting power. Each Class B share is entitled to 10 votes compared with one vote per Class A share, according to company filings. Penny Pritzker , who served as President Barack Obama’s campaign finance chairwoman and is the first cousin of Hyatt Executive Chairman Thomas J. Pritzker , serves on the board of the company as an independent director. Pritzker Family Hyatt’s IPO has conflicts that allow the founding Pritzker family to benefit ahead of shareholders, research firm Green Street Advisors said in a report last week. “Simply put, Hyatt’s corporate governance is the worst in our entire coverage universe,” wrote analyst John Arabia at the Newport Beach, California-based firm. “The existing owners are sending a strong signal to outside public shareholders that the Pritzker family will firmly control Hyatt, even if the family’s economic ownership interest falls below 50 percent.” Hyatt, which runs 413 Hyatt-brand hotels, is going public after the deepest recession since the 1930s cut hotel revenue and pushed some lodging owners to default on loans. Occupancy in the U.S. dropped to 57 percent this year through September, from 63 percent a year earlier, according to Smith Travel Research. To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net

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Dark Pool Proposals From SEC May Aim to Limit Growth as Trading Quadruples

October 15, 2009

By Michael Tsang and Whitney Kisling Oct. 15 (Bloomberg) — The U.S. Securities and Exchange Commission may restrict trading by so-called dark pools after lawmakers said a lack of transparency on the private venues hurts investors. The SEC may reduce the amount of orders that the stock networks are allowed to execute before being required to display them publicly and limit what traders call indications of interest that gauge demand without committing to buy or sell, said Sang Lee , a market analyst at Aite Group LLC, a Boston- based financial-services consultant. Dark pools, trading venues operated by firms such as Goldman Sachs Group Inc., Getco LLC and Credit Suisse Group AG that don’t display orders to the public, are getting increased scrutiny because their share of U.S. equity volume more than quadrupled to 9.4 percent in three years, according to Tabb Group LLC. Senator Ted Kaufman , a Democrat from Delaware, said the platforms may give an unfair edge to some investors. “The intention is to restrict the overall growth of these markets that they view as not transparent,” said Lee, whose firm counts the nation’s biggest banks, brokerages and hedge funds among more than 100 clients. “There’s a level of fairness that’s in question.” Trading in dark pools such as Credit Suisse’s Crossfinder and Goldman Sachs’s Sigma X, the two largest, has surged from 2 percent in mid-2006, according to estimates by Tabb, a New York- based financial-services consultant. Bloomberg LP, the parent of Bloomberg News, owns Bloomberg Tradebook LLC, an electronic stock-trading system that links to dark pools. Officials for Goldman Sachs and Credit Suisse weren’t immediately available to comment. Bigger Orders Investors are turning to dark pools to execute bigger orders and avoid revealing details such as price and size that could move a stock, according to Lee. The growth is creating an uneven playing field with exchanges, which face more regulation, the World Federation of Exchanges said in a letter last month to Mario Draghi , chairman of the financial-stability board of the Basel-based Bank for International Settlements. “The more the dark pools exist without any comprehensive regulation, the more you’re going to see liquidity siphon off from exchange markets,” Chicago Board Options Exchange Chief Executive Officer and WFE Chairman William Brodsky said at a conference in Vancouver on Oct. 7. The SEC said on its Web site yesterday it will consider changing “display obligations” for dark pools at an Oct. 21 meeting in Washington. The regulator will propose amending its definition for bids and offers to address “actionable indications of interest,” as well as changes to the way the industry disseminates data. More Scrutiny “They’re basically saying this community blew up and matured faster than we regulated, and now that it’s grown to this large extreme, let’s re-evaluate,” said Robert Newhouse , chief executive officer at Ballista Securities LLC, a New York- based network that specializes in block trades for options, in a telephone interview yesterday. “It’s very hard to understand how much liquidity is truly dark.” The SEC review coincides with increasing scrutiny of high- frequency trading, where computers automatically buy and sell thousands of shares a second, as part of a broader examination of the workings of equity and options markets. The agency proposed last month a ban on flash orders, in which a market holds quotes a split-second for some traders before they are routed to the public, after Democratic Senator Charles Schumer of New York urged a review and later said the practice could undermine fairness and transparency. Lower Threshold? “The current market structure appears to be the natural consequence of regulatory structures designed to increase efficiency and thereby provide the greatest benefits to the highest-volume traders,” Kaufman wrote in a letter sent in August to SEC Chairman Mary Schapiro . SEC rules require dark pools to display buy and sell orders after matching more than 5 percent of a stock’s average daily volume in four of the previous six months. Most of the groups shut down trading in a security when it approaches the 5 percent threshold. Regulators may consider cutting the limit to as low as 1 percent, according to Jamie Selway , founder of White Cap Trading LLC, a New York-based institutional brokerage. The SEC may also examine indications of interest, or IOIs, in which brokerages send messages showing their willingness to trade shares, according to Aite’s Lee. IOIs range from broadcasts that contain the symbol of a stock and an estimated size to detailed information that can be executed immediately. Indicator of Interest An IOI doesn’t commit a trader to buy or sell, which creates the potential for abuse by firms that want to gauge demand for a stock without intending to purchase it, Lee said. Selway said the SEC may classify some IOIs as formal bids and offers, forcing brokerages to display them publicly. That would end their use in dark pools, he said. “It’s not really an option to show everyone,” said Selway. “It defeats the purpose of the dark pool.” Tabb Group’s Larry Tabb says the SEC should require dark pools to report trading data before changing regulations. “We can’t even get an accurate count of what these guys are doing,” he said. “Before we start regulating, let’s get some decent reporting. Do we even know what we’re regulating?” To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Whitney Kisling in Scottsdale, Arizona at wkisling@bloomberg.net

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Buyout Firms Return to Market on Stock Rally as Select Medical Readies IPO

September 24, 2009

By Jason Kelly, Cristina Alesci and Michael Tsang Sept. 24 (Bloomberg) — The owners of Select Medical Holdings Inc. may almost double their money when the hospital operator goes public tomorrow as leveraged buyout firms take advantage of the steepest stock market rally in 70 years. Welsh Carson Anderson & Stowe and Thoma Cressey Bravo LLC will hold a stake valued at more than $1 billion if Select Medical fetches $12 a share, the midpoint for its initial public offering price. The private-equity firms invested $617 million in cash when acquiring the Mechanicsburg, Pennsylvania-based company in February 2005, according to a regulatory filing . Buyout firms are lining up IPOs to repay debt used to purchase companies and return profits to their investors. KKR & Co., Silver Lake and Fortress Investment Group LLC are among those planning share sales amid a 57 percent gain by the Standard & Poor’s 500 Index since March 9. “In an environment in which private-equity performance has suffered, the ability to demonstrate cash-on-cash returns by exiting investments at an attractive valuation is compelling and may help firms raise future funds,” said Andrew Wright , a partner at law firm Kirkland & Ellis LLP in New York. Select Medical plans to sell 33.3 million shares today at $11 to $13 apiece, raising as much as $433.3 million, according to a U.S. Securities and Exchange Commission filing. The stock is set to begin trading tomorrow on the New York Stock Exchange. Bankers arranged about $1.5 billion in financing for the Select Medical purchase by New York-based Welsh Carson and Thoma Cressey of Chicago, which subsequently split into two firms. The transaction was valued at $2.1 billion including assumed debt, according to data compiled by Bloomberg. The firms will use IPO proceeds mostly to reduce Select Medical’s debt, they said in the filing. Officials didn’t return phone calls seeking comment. KKR’s Pair KKR, based in New York, and Menlo Park, California-based Silver Lake, took Avago Technologies Ltd. public last month in a $745 million deal. The Singapore-based semiconductor maker has gained 16 percent since it began trading in early August. KKR subsequently filed an initial public offering for discount retailer Dollar General Corp. of Goodlettsville, Tennessee. RailAmerica Inc., a Jacksonville, Florida-based railroad operator owned by Fortress, said Sept. 22 it increased the size of its IPO to $450 million from $300 million. New York-based Fortress bought the company in February 2007. Private-equity firms bought a record $1.4 trillion of companies in 2006 and 2007, the height of the leveraged-buyout boom. The global credit crisis brought dealmaking to a halt and prevented firms from selling companies they already owned. ‘Pent-Up Demand’ “There is a pent-up supply of portfolio companies, many of which will go public,” said Jay Ritter , a professor of finance at the University of Florida. “During the last year, exits had ground to a halt.” Companies are selling shares after the S&P 500 climbed in six straight months, restoring about $4.9 trillion to U.S. equity markets. The advance since the gauge fell to a 12-month low in March represents the steepest rally since the Great Depression, according to data compiled by Bloomberg. Health-care stocks are the third best-performing industry behind household-product makers and technology companies in the S&P 500 since it climbed to a record 1,565.15 on Oct. 9, 2007. Ten companies may sell shares to the public this month, the most since January 2008, according to data compiled by Bloomberg. Together, the deals may raise $3.86 billion, the most since March 2008, when Visa Inc.’s $17.9 billion IPO accounted for almost all the money raised. Five companies, including KAR Holdings Inc., a vehicle- auction company based in Carmel, Indiana, and Houston-based Cobalt International Energy Inc., an energy-exploration firm, filed this month to raise as much as $1.82 billion. Talecris Among the biggest scheduled IPOs this month is Talecris Biotherapeutics Holdings Corp. , the drugmaker controlled by private-equity firm Cerberus Capital Management LP and Ampersand Ventures, which plans to raise $850 million on Sept. 30, according to data compiled by Bloomberg. The Research Triangle Park, North Carolina-based maker of protein therapies derived from blood plasma said in its Sept. 10 filing that it seeks to sell 44.7 million common shares at $18 to $20 apiece. At $19 a share, Cerberus and Ampersand would reap a profit of $300 million for their investors by selling 15.8 million shares. After the IPO, the private-equity firms will own 60.5 percent of Talecris, valued at $1.38 billion based on a $19 IPO price. Peter Duda , a spokesman for New York-based Cerberus, declined to comment, as did Becky Levin, a spokeswoman for Talecris, citing the quiet period before the IPO. Past Dividends Cerberus and Ampersand of Wellesley, Massachusetts, created Talecris after buying Bayer AG’s plasma business in 2005. At the time, the purchase was valued at $590 million, with the private- equity firms investing a combined $125 million in cash. Talecris has paid its owners at least $833.2 million in dividends since then, mainly funded by a $1.35 billion loan. Including the payouts, Cerberus and Ampersand are set to earn 20 times their initial cash investment in the company. The company will use its share of IPO proceeds to pay down debt. It doesn’t plan to pay shareholder dividends after the IPO, using all earnings to finance operations, according to its prospectus. To contact the reporters on this story: Jason Kelly in New York at jkelly14@bloomberg.net ; Cristina Alesci in New York at Calesci2@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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Buyout Firms Return to Market on Stock Rally as Select Medical Readies IPO

September 24, 2009

By Jason Kelly, Cristina Alesci and Michael Tsang Sept. 24 (Bloomberg) — The owners of Select Medical Holdings Inc. may almost double their money when the hospital operator goes public tomorrow as leveraged buyout firms take advantage of the steepest stock market rally in 70 years. Welsh Carson Anderson & Stowe and Thoma Cressey Bravo LLC will hold a stake valued at more than $1 billion if Select Medical fetches $12 a share, the midpoint for its initial public offering price. The private-equity firms invested $617 million in cash when acquiring the Mechanicsburg, Pennsylvania-based company in February 2005, according to a regulatory filing . Buyout firms are lining up IPOs to repay debt used to purchase companies and return profits to their investors. KKR & Co., Silver Lake and Fortress Investment Group LLC are among those planning share sales amid a 57 percent gain by the Standard & Poor’s 500 Index since March 9. “In an environment in which private-equity performance has suffered, the ability to demonstrate cash-on-cash returns by exiting investments at an attractive valuation is compelling and may help firms raise future funds,” said Andrew Wright , a partner at law firm Kirkland & Ellis LLP in New York. Select Medical plans to sell 33.3 million shares today at $11 to $13 apiece, raising as much as $433.3 million, according to a U.S. Securities and Exchange Commission filing. The stock is set to begin trading tomorrow on the New York Stock Exchange. Bankers arranged about $1.5 billion in financing for the Select Medical purchase by New York-based Welsh Carson and Thoma Cressey of Chicago, which subsequently split into two firms. The transaction was valued at $2.1 billion including assumed debt, according to data compiled by Bloomberg. The firms will use IPO proceeds mostly to reduce Select Medical’s debt, they said in the filing. Officials didn’t return phone calls seeking comment. KKR’s Pair KKR, based in New York, and Menlo Park, California-based Silver Lake, took Avago Technologies Ltd. public last month in a $745 million deal. The Singapore-based semiconductor maker has gained 16 percent since it began trading in early August. KKR subsequently filed an initial public offering for discount retailer Dollar General Corp. of Goodlettsville, Tennessee. RailAmerica Inc., a Jacksonville, Florida-based railroad operator owned by Fortress, said Sept. 22 it increased the size of its IPO to $450 million from $300 million. New York-based Fortress bought the company in February 2007. Private-equity firms bought a record $1.4 trillion of companies in 2006 and 2007, the height of the leveraged-buyout boom. The global credit crisis brought dealmaking to a halt and prevented firms from selling companies they already owned. ‘Pent-Up Demand’ “There is a pent-up supply of portfolio companies, many of which will go public,” said Jay Ritter , a professor of finance at the University of Florida. “During the last year, exits had ground to a halt.” Companies are selling shares after the S&P 500 climbed in six straight months, restoring about $4.9 trillion to U.S. equity markets. The advance since the gauge fell to a 12-month low in March represents the steepest rally since the Great Depression, according to data compiled by Bloomberg. Health-care stocks are the third best-performing industry behind household-product makers and technology companies in the S&P 500 since it climbed to a record 1,565.15 on Oct. 9, 2007. Ten companies may sell shares to the public this month, the most since January 2008, according to data compiled by Bloomberg. Together, the deals may raise $3.86 billion, the most since March 2008, when Visa Inc.’s $17.9 billion IPO accounted for almost all the money raised. Five companies, including KAR Holdings Inc., a vehicle- auction company based in Carmel, Indiana, and Houston-based Cobalt International Energy Inc., an energy-exploration firm, filed this month to raise as much as $1.82 billion. Talecris Among the biggest scheduled IPOs this month is Talecris Biotherapeutics Holdings Corp. , the drugmaker controlled by private-equity firm Cerberus Capital Management LP and Ampersand Ventures, which plans to raise $850 million on Sept. 30, according to data compiled by Bloomberg. The Research Triangle Park, North Carolina-based maker of protein therapies derived from blood plasma said in its Sept. 10 filing that it seeks to sell 44.7 million common shares at $18 to $20 apiece. At $19 a share, Cerberus and Ampersand would reap a profit of $300 million for their investors by selling 15.8 million shares. After the IPO, the private-equity firms will own 60.5 percent of Talecris, valued at $1.38 billion based on a $19 IPO price. Peter Duda , a spokesman for New York-based Cerberus, declined to comment, as did Becky Levin, a spokeswoman for Talecris, citing the quiet period before the IPO. Past Dividends Cerberus and Ampersand of Wellesley, Massachusetts, created Talecris after buying Bayer AG’s plasma business in 2005. At the time, the purchase was valued at $590 million, with the private- equity firms investing a combined $125 million in cash. Talecris has paid its owners at least $833.2 million in dividends since then, mainly funded by a $1.35 billion loan. Including the payouts, Cerberus and Ampersand are set to earn 20 times their initial cash investment in the company. The company will use its share of IPO proceeds to pay down debt. It doesn’t plan to pay shareholder dividends after the IPO, using all earnings to finance operations, according to its prospectus. To contact the reporters on this story: Jason Kelly in New York at jkelly14@bloomberg.net ; Cristina Alesci in New York at Calesci2@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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Bullish Wall Street Estimates Fail to Keep Up With S&P 500 for First Time

September 23, 2009

By Lynn Thomasson and Michael Tsang

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Stocks Cheapest Since ’89 Show Why Analysts Say Economists Wrong on Growth

September 7, 2009

By Eric Martin and Michael Tsang

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VIX Signals S&P 500 Swoon in September as History’s Worst Month Approaches

August 10, 2009

By Jeff Kearns and Michael Tsang

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