Goldman Sachs May Raise as Much as $3.8 Bln in IPO of Up to 14.8% of Firm
Goldman Sachs Share Sale to Raise as Much as $3.8 Bln (Update2)
(Adds investor and analyst comments; discussion of relative
share value; breakdown of revenue by business.)
New York, April 12 (Bloomberg) -- Goldman Sachs Group LP
plans to raise as much as $3.8 billion in a share sale next month
that will transform the 130-year-old investment banking
partnership into the fourth-largest U.S. securities firm.
As many as 69 million shares, or 14.8 percent of the firm,
will be sold for between $45 and $55 each, Goldman told the
Securities and Exchange Commission. The sale, expected the first
week of May, values the firm at as much as $25.6 billion.
Chairman and Chief Executive Henry Paulson's 4.13 million shares
could be worth as much as $227 million.
The share sale comes as investors drove up Wall Street
firms' stocks in anticipation of higher profits. Based on its
earnings, Goldman would be a more reasonably priced stock than
Merrill Lynch & Co., the biggest U.S. securities broker.
''Goldman could be a very good addition to our portfolio,''
said Jack Ablin, who manages $300 million at Colonial Asset
Management in Jacksonville, Florida, including shares of Merrill.
''We'll be looking at it.''
Goldman, which makes money trading, managing funds and
advising governments and companies, earned $2.70 a share in its
year ended Nov. 27. At a $55 stock price, that's a price-to-
earnings ratio -- a measure of investor optimism -- of 20.4, less
than Merrill Lynch's 28.3 and more than the 17 for Morgan Stanley
Dean Witter & Co., the biggest firm by equity capital.
Goldman, which earlier said it would sell shares between $40
and $50, raised the price because stocks of brokerage firms have
rallied amid forecasts for higher earnings. Merrill Lynch rose 11
percent this month while Morgan Stanley climbed 12 percent.
Beating Expectations
Bear Stearns Cos., the sixth-biggest firm, today said third-
quarter earnings jumped 23 percent to $1.42 a share, beating
analysts' forecasts of $1.15.
Goldman earned a record $1.19 billion before partners'
compensation and taxes in its first quarter ended Feb. 28, up 16
percent. Including compensation, corporate taxes and other
expenses, it would have earned $520 million, or $1.08 per share,
according to the SEC filing.
''They are a big, powerful and successful company and I'm
sure this deal will be very popular,'' said John Keefe, an
independent securities analyst at Keefe Worldwide in New York.
The share sale, rejected by partners six times in 30 years
before approval last June, will value the stakes of the firm's
more than 200 managing directors at as much as $15.6 billion.
After Paulson's holding, Robert Hurst, co-head of investment
banking, owns 3.84 million shares worth as much as $211 million.
John Thain, co-chief operating officer, owns 3.1 million shares
worth as much as $170 million. John Thornton, co-chief operating
officer, owns 3.01 million shares worth as much as $165 million.
David Viniar, chief financial officer, owns 1.72 million shares
worth as much as $94 million.
Board Seats
All the executives will sit on Goldman's corporate board of
directors, which will also include company employees and two
outsiders, Sir John Browne, chief executive of BP Amoco Plc, and
James Johnson, chairman of Fannie Mae.
Goldman has been a private firm since it was founded in 1869
by Marcus Goldman as a buyer of promissory notes. Selling stock
will help the company make acquisitions, pay employees and
establish a permanent pool of capital. As a partnership, Goldman
was vulnerable because when partners left, they took their money
with them.
The firm filed with the SEC to sell 60 million shares; it
could sell as many as 69 million if investor demand is
sufficient, according to the document.
Goldman canceled the IPO in September because plummeting
debt markets caused millions of dollars of losses trading bonds
and sent brokerage stocks tumbling more than 60 percent from
their July highs.
The company's fourth-quarter profit fell 81 percent on bond
losses. That prompted the ouster as co-chief executive of Jon
Corzine, a former bond trader who'd overseen the growth of
trading at Goldman since becoming chairman in 1994.
Profit Rebound
Profits at most Wall Street firms rebounded as financial
markets recovered late last year, setting records in early 1999
and reviving stock and bond sales and mergers and acquisitions.
In Goldman's first quarter, investment banking revenues rose
42 percent to $902 million. That included $522 million from
advising on mergers and acquisitions and $380 million from
underwriting the sale of stocks and bonds. The firm cited its
work in the media, telecommunications, entertainment, healthcare
and financial industries as the primary drivers of investment
banking division.
The firm's business of trading stocks and bonds for clients
and making bets in financial markets using its own capital saw a
15 percent gain in the quarter to $1.36 billion. The bulk of that
income, $876 million, came from trading fixed-income securities,
derivatives, currencies and commodities. Equity trading income
rose 25 percent to $455 million and principal investment income
fell to $26 million from $76 million.
Goldman had $202 million in revenue from asset management in
the first quarter, $207 million from its securities services,
which includes its prime brokerage and securities lending
businesses; and a further $327 million from fees for executing
trades on behalf of clients. Goldman had $370 billion of assets
under management at the end of February. |
