initial public offerings (IPOs) trading on American exchanges

Wednesday, January 26, 2011

Nielsen raises $1.89bn in landmark US flotation

Nielsen, the media measurement group, has achieved the biggest private-equity led initial public offering yet in the US, at $1.89bn.

(Bloomberg) Nielsen Holdings NV (NLSN) and Demand Media Inc. (DMD) rallied in their first day of trading after selling their initial public offerings above the forecast price ranges. Nielsen Holdings shares rose 8.7 percent and Demand Media shares increased 33 percent.

Nielsen, the television ratings company owned by Blackstone Group LP, Carlyle Group, KKR & Co. and Thomas H. Lee Partners LP, climbed 8.7 percent to $25 in New York Stock Exchange trading after raising $1.6 billion in the biggest private equity-backed U.S. IPO since 2006. Demand Media, which uses freelancers to provide low-cost content for websites, surged 33 percent to $22.65 after selling $151 million in shares in the first venture capital-led U.S. IPO of 2011.

LBO funds are betting that the Standard & Poor’s 500 Index’s rally to a two-year high will increase demand for IPOs of debt-fueled acquisitions completed as credit markets started to freeze four years ago. Venture capital-backed companies from LinkedIn Corp. to Groupon Inc. are also considering initial offerings, people familiar with the situation have said.

“We’re off to a strong start to the overall market and as a result of that the IPO market is off to a good start as well,” said Quinten Stevens, managing partner at Darien, Connecticut-based hedge fund Stevens Asset Management LLC. “It’s a good environment for the balance of the year for investors and companies.”

JPMorgan, Morgan Stanley

Nielsen sold 71.4 million shares at $23 each after offering them at $20 to $22 apiece, according to its filing with the U.S. Securities and Exchange Commission. New York-based JPMorgan Chase & Co. and Morgan Stanley led the offering.

Demand Media, run by former MySpace Inc. Chairman Richard Rosenblatt, sold 8.9 million shares at $17 each yesterday after originally offering 7.5 million shares for $14 to $16 apiece. New York-based Goldman Sachs Group Inc. and Morgan Stanley arranged the IPO.

Today’s closing price gave Demand Media a market capitalization of $1.8 billion, data compiled by Bloomberg show. New York Times Co. has a value of $1.6 billion.

The sale by Nielsen was the biggest from a private equity- backed LBO target in the U.S. since Spirit AeroSystems Holdings Inc. raised $1.65 billion in November 2006, according to data compiled by Bloomberg and Renaissance Capital LLC. The Wichita, Kansas-based company, bought by Onex Corp. of Toronto in 2005, sold shares for $26 each, eight times more than the average $3.06 paid by existing owners, the prospectus showed.

2006 Acquisition

Nielsen was acquired in July 2006 for 8.9 billion euros ($11.4 billion), including the assumption of debt. The IPO price represents a 41 percent paper gain from the average $16.32 a share the company’s existing owners paid, according to the SEC filing and data compiled by Bloomberg.

The IPO was set to trim the stakes held by New York-based Blackstone and KKR, Carlyle of Washington and Thomas H. Lee in Boston to about 16 percent each from 20 percent. San Francisco- based Hellman & Friedman LLC’s holding would decline to 7.6 percent from 9.6 percent, while AlpInvest Partners NV of Amsterdam’s share would drop to 5.4 percent from 6.8 percent, according to the SEC filing.

Nielsen has operations in about 100 countries and measures audiences across TV, radio, websites and mobile phones. Its TV ratings are an industry standard that helps set advertising prices in the U.S. Nielsen also measures retail transactions and consumer behavior for the packaged-goods industry.

Relative Value

The company cited TiVo Inc. of Alviso, California, and Englewood, Colorado-based Dish Network Corp., which are developing services to measure TV viewership, along with Reston, Virginia-based ComScore Inc., which compiles statistics on Internet usage, as competitors in the SEC filing.

Nielsen’s 2010 revenue rose as much as 6.7 percent to $5.13 billion, while operating income was between $715 million and $735 million, according to a filing last week. The company, which has reported net losses every year since the buyout, said it couldn’t yet provide net income figures for last year.

At the original midpoint price, Nielsen would have about $7.2 billion more debt than cash, or about 5.8 times the company’s $1.25 billion of estimated full-year earnings before interest, taxes, depreciation and amortization based on reported results for the first nine months of 2010, according to its filing. TiVo had no debt and ComScore had more cash than its borrowings, while Dish Network had net debt equal to 1.3 times its estimated 2010 Ebitda, Bloomberg data show.

Private Equity IPOs

The 31 U.S. IPOs backed by private equity firms last year had average net debt of about 3.65 times annual Ebitda. The shares rose 4.1 percent on average in the first month of trading, less than half the 9.2 percent advance for all other IPOs, according to data compiled by Bloomberg.

More than half of the U.S. IPOs planned for 2011 are backed by LBO firms after the S&P 500 recouped all its losses since the collapse of New York-based Lehman Brothers Holdings Inc. in September 2008, data compiled by Bloomberg show. The benchmark gauge for U.S. stocks has surged 92 percent since March 9, 2009.

“Market conditions will certainly impact pricing,” said Hugh Johnson, who oversees about $2 billion as chairman of Albany, New York-based Hugh Johnson Advisors LLC. With Nielsen, “they helped the private equity issuers,” he said.

A record $1.6 trillion in leveraged buyouts were completed from 2005 to 2007, according to Preqin Ltd., a London-based research firm. In LBOs, private equity firms borrow most of the money used to take controlling stakes in companies. They try to increase the value of those companies by cutting costs, eliminating workers and closing unprofitable businesses, with the aim of selling their stakes at a higher price.

HCA, Kinder Morgan

HCA Holdings Inc. of Nashville, Tennessee, and Houston- based Kinder Morgan Inc. are among more than two dozen companies owned by buyout firms that had filed with the SEC as of the end of 2010 to sell $14 billion of shares in IPOs, according to data compiled by Bloomberg. That’s more than double the $6.6 billion raised last year. Venture capital-backed companies filed to raise $2.86 billion in IPOs.

LinkedIn, the largest networking website for professionals, has hired banks to advise on an IPO this year, people familiar with the plans said this month. The Mountain View, California- based company’s backers include Bain Capital Ventures, Sequoia Capital and Greylock Partners.

Groupon, BankUnited

Groupon, the biggest daily deal website, is talking to Goldman Sachs and Morgan Stanley about an IPO, people familiar with the discussions have said. The Chicago-based company’s Chief Executive Officer Andrew Mason said this week in an interview at the Digital-Life-Design conference in Munich that Groupon isn’t convinced it will sell shares anytime soon.

The offerings from Nielsen and Demand Media were among at least seven U.S. IPOs scheduled for this week, data compiled by Bloomberg show.

BankUnited Inc.’s IPO is likely to price above the forecast range tomorrow as demand for shares of the Miami Lakes, Florida- based lender outstrips supply, according to a person with knowledge of the matter. Private equity investors including Blackstone and Carlyle took over BankUnited for $900 million in 2009 after it was shut by federal regulators.

“The market is not going to constrain itself to a particular flavor of IPO,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees $52.5 billion. “Risk appetite is higher this year, and the market appears to be looking at a greater range of venues to put that capital to work.”

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