Hertz, Nymex, KBR Lead IPOs Seeking $3.3 Billion
2006-11-13 17:41 (New York)
By Elizabeth Hester

Nov. 13 (Bloomberg) -- Hertz Global Holdings Inc., the
world's biggest rental-car agency, Nymex Holdings Inc., the
largest marketplace for energy transactions, and KBR Inc., the
No. 1 military contractor in Iraq, lead nine U.S. initial public
offerings this week seeking to raise as much as $3.3 billion.

The 10 stocks that debuted last week on U.S. exchanges
gained an average of 6.9 percent, led by a 37 percent jump in the
shares of New York-based investment bank KBW Inc. Those $1.3
billion in sales brought to $38.7 billion the amount raised in
U.S. IPOs this year, the most since 2000.

``It's a great time to go public,'' said Eric Green, who
helps manage $4 billion at Cherry Hill, New Jersey-based Penn
Capital Management Co. and placed an order for shares of Nymex,
operator of the New York Mercantile Exchange.

The size of this week's deals underscores the confidence
that chief executive officers have in the stock market after the
Dow Jones Industrial Average rose to another record on Nov. 8 and
the Standard & Poor's 500 Index approaches a six-year high.
Private-equity firms also are taking advantage of buoyant stock
indexes to raise money from public investors.

In other offerings scheduled this week, Denver-based Venoco
Inc. and Baltimore's Constellation Energy Partner LLC, two energy
producers, plan to sell $262.5 million and $94.5 million of
stock, respectively. First Solar Inc., a maker of solar panels
based in Phoenix, is seeking $332.5 million in its IPO.

$3.7 Billion Possible

The nine offerings slated for this week may raise an
additional $443.2 million if demand is strong enough for
underwriters to exercise options for extra shares and sell them
at the maximum projected price. That would bring the total value
to more than $3.7 billion.

Securities firms including Goldman Sachs Group Inc., which
is underwriting the KBR and Hertz IPOs, may collect as much as
$198.2 million from this week's deals, based on the industry's
average fee of 6 percent in the U.S. this year. If all of the
extra shares are sold, that figure could rise by $26.5 million.

Hertz's owners, Clayton Dubilier & Rice Inc., the Carlyle
Group and Merrill Lynch & Co., are selling shares just 11 months
after buying the Park Ridge, New Jersey-based company from Ford
Motor Co. for $15 billion. Proceeds from the $1.59 billion IPO
will be used to repay a $999.2 million loan and fund a $426.8
million distribution to Clayton Dubilier, Carlyle and Merrill.

The three investors previously paid themselves a $1 billion
dividend in June and increased Hertz's debt by $3.4 billion in
the past year. Francis Gaskins, president of IPODesktop.com in
Los Angeles, estimates that Clayton Dubilier, Carlyle and Merrill
will have made back about 75 percent of their initial investment

after the IPO.

Fastest Profit

``It's the fastest short-term profit I've ever seen in a
leveraged buyout,'' he said.

Hertz filed to sell 88.2 million shares at $16 to $18
apiece. The offering is scheduled for Nov. 15.

The underwriters may be forced to reduce the size or the
price of the offering to attract investors, said John Fitzgibbon,
founder of ipoScoop.com in Jersey City, New Jersey, last week.

Net income dropped to $76.1 million, or 33 cents a share,
from $325.3 million, or $1.42, a year earlier due to higher
interest expenses, according to a filing with the U.S. Securities
and Exchange Commission today. Interest expenses almost doubled
to $672.6 million as the owners refinanced existing loans at
higher interest rates and added debt.

``Generally the market does not look at or give IPOs from
private equity firms the same respect that initial startups
get,'' said Jack Ablin, who oversees about $48 billion as chief
investment officer at Chicago-based Harris Private Bank, citing
concerns about the financing of these deals.

Nymex Offering

Nymex, where futures contracts for crude oil, natural gas,
unleaded gasoline and other products are traded, plans to raise
as much as $337 million for itself and former seatholders. The
New York-based company filed to sell 6.48 million shares at $48
to $52 each and plans to price the offering on Nov. 16.

``That's a deal we definitely want to be involved in,'' said
Penn Capital's Green. ``In the new issues market we buy and hold,
and this is one at these levels we definitely want to hang on
to.''

Shares of Intercontinental Exchange Inc., Nymex's chief
rival, have tripled since its November 2005 debut. The Chicago
Mercantile Exchange has risen more than 14-fold since it went
public in 2002. The Chicago Board of Trade, which last month
agreed to merge with the CME, sold shares for the first time in

October 2005. The stock has almost tripled since then.

Cheney Association

KBR, the Houston-based construction and government-
contracting unit of Halliburton Co. formerly known as Kellogg,
Brown & Root, may raise as much as $473.3 million. It plans to
sell 27.8 million shares at $15 to $17 tomorrow.

Halliburton, headed from 1995 to 2000 by Republican Vice
President Dick Cheney, has drawn repeated criticism from
Democratic lawmakers who say the company benefited from its
political connections. Some of the deals that drew scrutiny were
no-bid contracts awarded to KBR.

``Kellogg, Brown & Root is doing the work in Iraq, not
Halliburton, and Halliburton is the household name for which Dick
Cheney used to work,'' said Robert MacKenzie, an analyst at
Friedman Billings Ramsey & Co. in Arlington, Virginia.

``Halliburton had planned to do this IPO much earlier, but the
capital markets weren't receptive to IPOs until recently.''

--With reporting by Matthew Leising in New York, Jim Kennett in
Houston and Carol Wolf in Cleveland, Editor: Schatzker (cvz).