November 1999 Contents
United Parcel and Hewlett-Packard Spin-Off Agilent Technologies With October finishing on a strong note in the IPO market, analysts expect November to start off quickly and may tail off at the end, owing to Y2K concerns. With many new issues penciled in for tentative pricing during the month, a check at the accompanying IPO Forward Calendar reveals: 71 companies are readying the engines. By far, a huge month is on tap in terms of proceeds. Anchoring the near $14 billion month are three mammoth issues that include Agilent Technologies, the spin-off from Hewlett-Packard, Charter Communications, the cable operation controlled by Microsoft co-founder Paul Allen and of course The United Parcel Service issue that if priced at the apex of talk would be the largest domestic IPO in history and generate roughly $4.6 billion. While the calendar boasts an enormous amount of Internet and technology deals, there are three deals that are likely to steal the thunder. First off, Agilent Technologies set to debut the week of November 8 is looking to price 57 million shares at a range of $19-$22 through an elite underwriting team headed by Morgan Stanley Dean Witter and Goldman, Sachs. Slated for trading on the Big Board under the ticker symbol A, Agilent is a tech outfit that provides enabling solutions to high growth markets with the following industries that include communications, electronics, life sciences and healthcare. Browsing the company's latest offering statement, it reveals that H-P will hold onto a post-IPO stake of 87%. Attempting to price a float of 170 million shares at talk of $17-$19, the syndicate is headed by Goldman, Sachs and features co-managers Bear Stearns, Morgan Stanley Dean Witter, Donaldson, Lufkin & Jenrette, among other high octane names. The key to this offering: voting power. Investors purchasing the class A shares receive one vote a share while occupants of the B stock garner ten votes a share. Ready to make history, the United Parcel Service may in fact surpass Conoco's $4.4 billion 1998 initial public offering, if the deal prices above talk. Strike Technologies, Brass Utility Plan To Merge, Combining Trading Systems Two of the country's alternate stock-trading networks said they agreed to merge, in what could signal a consolidation of the many trading systems now competing with traditional markets. The boards of Strike Technologies LLC and Brass Utility LLC said they had signed a letter of intent to merge. They expect the merger, for which some details haven't been settled, to close by the end of the year. Both are based in New York. Strike and Brut are known as ECN's or electronic communications networks, which automatically collect, display and execute customers' stock orders. Although regulated as brokers, they behave more like stock exchanges, and their proliferation in the past three years has posed a growing threat to the Nasdaq Stock Market and New York Stock Exchange. But while they provide cheap and fast executions, their growth has also "fragmented" volume among multiple locations, making it harder for investors to ensure they ae getting the best possible price on their entire order. Wall Street firms have invested in many of these trading systems as a hedge against the demise of traditional markets, but they are increasingly pressing for consolidation among them. The Brut-Strike merger was a natural place to start, because both count major Wall Street firms, which provide orders to the systems, as principal shareholders. The agreement, which was expected, would create what its shareholders say would be the country's third-largest ECN, behind Reuters Group PLC's Instinet Corp. and Datek Online Holdings Corp.'s Island ECN Inc. Brut and Strike claim a combined daily volume of about 40 million shares. However, definitive ECN volume data are elusive. Start-Up To Partner With Real-World Retailers . . . Companies that help bricks-and-mortar retailers develop an online business are nothing new -- interactive agencies have been doing it for years. But a new Silicon Alley firm, Online Retail Partners, is focusing its entire business on partnering with real world retailers, and it's taking an interesting approach to the alliances. This approach has already gotten the fledgling firm $62 million in strategic and venture financing, in a round led by Liberty Digital and joined by Comcast Interactive Capital, Pequot Private Equity, Oak Investment Partners, Ramsey Beirne Associates, Inc. and Online Retail Partners sponsor Global Retail Partners. Rather than act simply as a service provider to offline retailers, Online Retail Partners asks that its partners spin off a separate company for the online part of their business. ORP then takes the role of a venture capitalist, infusing the new entity with financing, taking a significant stake, and helping it build out its management team. ORP also acts as an interactive agency. It plans marketing strategies and builds the Website, but it won't be building each Website from scratch. The company will use the technology built for one online store across multiple offerings, thereby reducing the cost of each site. The company also plans to leverage another key asset, these new e-tailers possess -- customer data. ORP expects to take data gathered from one e-commerce site and use it more effectively to try to lure customers to the other stores in which it has a stake. The most important key to success here may be the quality of ORP's bricks-and-mortar partners. So far, the company has landed two deals, with toy retailer Zany Brainy, and with Dick's Sporting Goods. Neither has the brand-name recognition of, say, a Gap, but ORP believes they have enough of a customer base to build upon. A key to ORP's strategy is the idea that a bricks-and-mortar company, with its existing customer relationships and real-world presence, will be able to acquire customers more cheaply than an Internet pure-play competitor. MSN Introduces Internet Call Waiting In Three Cities Through Nortel Microsoft's MSN Web service and Nortel Networks are offering an Internet version of call waiting and caller ID that lets people with one phone line log on and still know when they're getting a call and who's calling. The new service, costing an extra $5 or $6 a month, uses a pop-up window on a computer screen to show when there's an incoming phone call, displaying the name and phone number of the caller. The pop-up window offers a few alternatives if the person getting the call doesn't want to pick up the phone and end their Internet connection. The call can be forwarded to another number such as a voice mail line or mobile phone. The user can also send a recorded or generic "call back" message to the caller. Or, for those with the necessary equipment in their personal computer, the call can be answered through that PC without terminating the Internet connection. MSN launched the service last week for its subscribers in Atlanta, Seattle and San Diego, and plans to offer it in 50 major U.S. markets over the next several months. While Nortel's technology is somewhat new in this country, it has been available in Canada for more than a year. To use the service, subscribers also need to order "call forward busy" from their local phone companies, which costs from 50 cents to $2 per month in most parts of the country, but can go as high as $3.35 a month in California communities served by Pacific Bell. There is no activation fee from Nortel or MSN, which hopes to integrate the monthly charge for Internet call waiting into its monthly bill. Nortel will operate the service for MSN and bill customers directly at first. Despite the added expense, the service could prove very attractive to consumers and small businesses, who might otherwise miss calls or have to pay the $15 to $25 a month it costs to have a second phone line. Likewise, although the new high-speed offering called DSL, or digital subscriber line, enables a simultaneous Internet and telephone connection over a single phone line, the service generally costs from $40 to $60 a month. Online Brokerage Firm Wit To Acquire SoundView Online securities brokerage firm Wit Capital Group Inc., in a effort to quickly enhance its research and investment banking capabilities, is buying SoundView Technology Group Inc., a technology banking boutique. Wit, the New York firm best known for distributing share of stock deals to investors over the Internet, will pay about $325 million in stock for the closely held SoundView, based on Wit's closing share price of $17.5625. Founded three years ago by an ex-lawyer and beer-company entrepreneur, Wit offers its online-brokerage customers access to deals online; the investors sign up and receive limited shares on a first-come, first-serve basis. The firm has been slowly hiring investment bankers and research analysts to become a bigger player in the still-clubby world of stock underwriting. But like other new online bands-outfits such as E*Offering and W.R. Hambrecht & Co.- the company has had a hard time competing with established Wall Street firms, which can offer top-notch research coverage and trading support once a new stock goes public. Online underwritings still account for only a tiny percentage of all deals. The acquisition of SoundView, with its team of 21 technology-focused research analysts and a sales and trading staff catering to big institutional clients, could help Wit stand out from the pack-though it moves the firm away from its original, narrow focus on individual investors. Most important, the added firepower could help Wit get larger slices of hit initial-public offerings to distribute to its small base of around 53,000 online-brokerage customers. Wit, which had third-quarter revenue of $12.4 million and net loss of $5.1 million, often serves as a secondary co-manager of deals underwritten by larger firms, such as Goldman Sachs Group Inc. and Morgan Stanley Dean Witter & Co. Wit officials have long said they don't aspire to serve as a lead underwriter, preferring to parcel out shares of higher-quality deals to their clients. Similarly, SoundView has lead-managed only a handful of stock deals this year. Japanese Business in the United States
| |
| Contact Information: Morgen, Evan & Company, Inc. Copyright 1999 |