By John E. Fitzgibbon, Jr.
One quick glance at today’s forward IPO calendar tells you all you need to know about the new-issues market.
Over the next two weeks, bankers have 19 new faces on the new-issues calendar. Last year, bankers priced 201 IPOs for an average of about eight deals over a two-week period.
This does not include the carryovers from last week.
The current IPO traffic breakdown is about evenly divided. This week, bankers have nine new faces on this week’s IPO calendar. Those deals are expected to raise about $1.47 billion. And for the following week, February 5, bankers have another 10 new faces on the IPO calendar. Those deals are expected to raise about $1.38 billion.
But there is a difference in what is going public.
This week’s offerings consist of a pharmaceutical company (Molecular Insight Pharmaceuticals) that’s been in the IPO pipeline since November 2005 and a development-stage medical equipment company (Xtent), plus the usual suspects. Those suspects are a handful of “blank check” companies and another oil and gas limited partnership.
XtentThe IPO calendar for the week of February 5 is a bit more interesting. It is sprinkled with technology companies.
Waiting in the wings to go public are such companies as a robotic surgery company (Accuray), an Israeli cellular service provider (Cellcom Israel), a Chinese solar cell producer (JA Solar), a networking products provider (Switch and Data), and others.
Cellcom IsraelSwitch and DataChecking the Pulse
Now let’s turn back to this week and the medical equipment and biopharmaceutical offerings.
In the past year, there has been a developing trend in pricing IPOs from those industrial sectors. It is the emergence of the old Econ 101 theory—supply versus demand.
When the supply (number of shares being offered at a given price range) is greater than the demand for the IPO (not enough buyers willing to pay the original offering price), then the terms have to be reduced to get the deal out the door. Once the supply side (the IPO) and the demand side (its buyers) are in tune, then the deal gets done at a lower price.
Consider the following: In 2006, bankers priced 33 IPOs from the medical equipment and biopharmaceutical sectors, according to available records. Of that number, 23 IPOs were priced below their original filing ranges.
And, in most cases, they lacked any aftermarket punch.
In 2006, bankers priced a total of 201 IPOs.
The 33 IPOs from the medical equipment and biotech sectors had an average opening-day gain of 6.4 percent.
The 168 IPOs from all the other industrial sectors had an average opening-day gain of 14.4 percent.
This isn’t to say that this week’s medical equipment and pharmaceutical IPOs will lack an aftermarket punch. But at press time, there haven’t been any signs of either being on anyone’s “most wanted” list.
However, this is Wall Street. Anything can happen.
Inside This Week’s IPO Calendar
This week’s new-issues calendar lists 12 deals, including three carryovers from last week. Here are the industrial sectors:
· Three “blank check” companies (Dekania, Information Services Group, and Union Street)
· An insurance company (Employers Holdings)
· An oil and gas limited partnership (Duncan Energy Partners)
· A medical equipment provider (Xtent)
· A pharmaceutical company (Molecular Insight Pharmaceuticals)
· A real estate services provider (HFF)
· A veterinary products supplier (Animal Health International)
The carryovers:
· Three “blank check” companies (China Health Care, NTR Acquisition, and Renaissance Acquisitions)
The bankers expect to raise $1.84 billion.
Company Profiles
—Animal Health International is a Westlake, Texas-based distributor of animal health products. The company sells over 35,000 products to more than 62,000 customers from 68 distribution locations strategically located across the United States and Canada.
Animal Health International plans to price 11.8 million shares at $10 to $12 each to raise $129.8 million. The company will offer 9.1 million shares and selling shareholders will offer 2.7 million shares. The IPO is to start trading on Wednesday.
For the three months ending September 30, 2006, Animal Health International reported net income of $901,000 on net sales of $145.7 million, compared with net income of $742,000 on net sales of $127.7 million for the same period a year ago.
Animal Health International
Formed in 1954, Animal Health International has about 815 employees.
Animal Health International
Underwriters: JPMorgan is the lead manager. Acting as co-managers are William Blair, Piper Jaffray, and Robert W. Baird.
Selected Principal Shareholder: Charlesbank Funds
52-Week Percentage Change:
Dow Jones U.S. Industrial Suppliers Index: down 8.59 percent
U.S.Nasdaq Composite Index: up 6.62 percent
—Duncan Energy Partners L.P. is a Houston-based limited partnership recently formed by Enterprise Products Partners to operate a diversified portfolio of midstream energy assets. The company gathers, transports, markets, and stores natural gas. It also transports and stores natural gas liquids and petrochemicals.
Duncan Energy Partners L.P. plans to price 13 million common units representing partnership interests at $19 to $21 each to raise $260 million. The IPO is to start trading on Tuesday.
The company plans an initial distribution of $0.40 per unit per quarter, or $1.60 per unit per year.
Underwriters: Lehman Brothers and UBS Investment Bank are the joint-lead managers. Acting as co-managers are Citigroup, Goldman Sachs, Morgan Stanley, and Wachovia.
Selected Principal Shareholder: Enterprise Product OLP
Enterprise52-Week Percentage Change:
Dow Jones U.S. Pipeline Index: up 12.99 percent
U.S.Nasdaq Composite Index: up 6.62 percent
—Employers Holdings is a Reno, Nevada-based specialty provider of workers’ compensation insurance to select small businesses engaged in low- to medium-hazard industries. The company has historically targeted employers in several Western states, primarily California and Nevada.
Reno, Nevada-based
NevadaEmployers Holdings plans to price 23 million shares at $14 to $16 each to raise $345 million. The IPO is to start trading on Thursday, February 1.
For the nine months ending September 30, 2006, Employers Holdings reported net income of $116.5 million on total revenues of $359.2 million, compared with net income of $63.1 million on total revenues of $371 million for the same period a year ago.
Employers Holdings
Formed in 2000, Employers Holdings has about 628 employees.
Employers Holdings
Underwriters: Morgan Stanley is the lead manager. Acting as co-managers are Cochran Caronia Waller, Fox-Pitt Kelton, and Keefe Bruyette & Woods.
52-Week Percentage Change:
Dow Jones U.S. Full Line Insurance Index: up 5.83 percent
U.S.Nasdaq Composite Index: up 6.62 percent
—HFF is a Pittsburgh-based provider of commercial real estate and capital markets services to the real estate industry. The company operates 18 offices nationwide with more than 130 transaction professionals and about 270 support associates.
HFF plans to price 14.3 million shares at $15 to $17 each to raise $228.8 million. The IPO is to start trading on Wednesday.
For the nine months ending September 30, 2006, HFF reported net income of $31.7 million on total revenues of $156.5 million, compared with net income of $29 million on total revenues of $137.3 million for the same period a year ago.
HFF
Formed in 2006, HFF has about 408 employees.
HFF
Underwriters: Goldman Sachs and Morgan Stanley are the joint-lead managers. Acting as co-managers are Banc of America Securities, Wachovia Securities, and JPMorgan.
JPMorgan.
Selected Principal Shareholder: HFF Holdings LLC
52-Week Percentage Change:
Dow Jones U.S. Real Estate Development & Holding Index: up 35.6 percent
U.S.Nasdaq Composite Index: up 6.62 percent
—Molecular Insight Pharmaceuticals is a Cambridge, Massachusetts-based pharmaceutical company specializing in molecular medicine in improving patient healthcare by addressing unmet needs. The company is targeting radio therapeutics and molecular imaging pharmaceuticals with applications in the areas of oncology and cardiology.
Molecular Insight Pharmaceuticals plans to price 5 million shares at $14 to $16 each to raise $75 million. The IPO is to start trading during the week of January 29.
Formed in 1997, Molecular Insight Pharmaceuticals has never generated revenues. It had an accumulated deficit of $77 million on September 30.
Molecular Insight Pharmaceuticals
The company has about 37 employees.
Underwriters: RBC Capital Markets and Jefferies are the joint-lead managers. Acting as co-managers are A.G. Edwards and Oppenheimer.
Selected Principal Shareholder: Cerberus Partners L.P.
52-Week Percentage Change:
Dow Jones U.S. Pharmaceutical Index: up 14.3 percent
U.S.Nasdaq Composite Index: up 6.62 percent
The “blank check” companies:
—Dekania is a Philadelphia-based “blank check” company recently formed to focus on identifying prospective targets in the insurance industry that are incorporated in the United States, Canada, Bermuda, or the Cayman Islands and that have substantially all of their business, and all of their insurance risk, in the United States.
The company plans to price 9.7 million units consisting of one share of common stock and one warrant at $10 each. The units are expected to trade during the week of January 29. The underwriters are Merrill Lynch and Maxim Group.
—Information Services Group is a Stamford, Connecticut-based “blank check” company recently formed for the purpose of effecting a merger, capital stock exchange, asset, stock acquisition, or other similar business combination with one or more domestic or international operating businesses engaged in the information services industry, including business, media, marketing, and consumer information opportunities.
The company plans to price 18.8 million units consisting of one share of common stock and one warrant at $8 each. The units are expected to trade during the week of January 29. The underwriters are Deutsche Bank, Morgan Joseph, and Lazard Capital Markets.
—Union Street Acquisition is an Alexandria, Virginia-based “blank check” company recently formed for the purpose of acquiring through a merger, capital stock exchange, stock purchase, asset acquisition, or other similar business combination, an operating business in the business services industry.
The company has no specific business combination under consideration. The company plans to price 12.5 million units consisting of one share of common stock and one warrant at $8 each. The units are expected to trade during the week of January 29. The underwriters are Banc of America Securities and Morgan Joseph.
The “Blank Checks” Carryovers
—China Healthcare Acquisition is a Pasadena, California-based “blank check” company recently formed to acquire one or more businesses with operations primarily in the People’s Republic of China. The company plans to price 8.5 million units consisting of one share of common stock and two warrants at $6 each. The units are expected to trade during the week of January 29. The underwriters are Ferris Baker Watts and Ladenburg Thalmann.
—NTR Acquisition is a Danbury, Connecticut-based “blank check” company recently formed to acquire one or more businesses with operations in refining, distributing, and marketing petroleum products in North America. The company plans to price 25 million units consisting of one share of common stock and one warrant at $10 each. The units are expected to trade during the week of January 29. The underwriters are Citigroup and Ladenburg Thalmann.
—Renaissance Acquisitions is a Pompano Beach, Florida-based “blank check” company recently formed to acquire one or more businesses. The company does not have any specific business combination under consideration. The company plans to price 13 million units consisting of one share of common stock and one warrant at $6 each. The units are expected to trade during the week of January 29. The underwriters are Ladenburg Thalmann and EarlyBird Capital.