Information is coming out! Charter's IPO imminent
amcity.com
July 26, 1999
Charter's IPO imminent
John Egan
Charter Communications Inc. is expected to register by the end of this month for its $2 billion to $3 billion initial public offering, with Goldman Sachs & Co. as the lead underwriter, sources said.
One source said July 21 that Charter's IPO filing with the federal Securities Exchange Commission would come within a week. Another source said the filing was "very close."
A third source said Goldman would be the lead underwriter for the IPO. "If they don't have Goldman as their lead manager, I will have an enormous heart attack," that source said.
A.G. Edwards & Sons Inc. will be among three or four co-managers of the IPO, sources said.
Goldman, a New York investment bank, has done other work for Charter, including helping it sell about $3 billion worth of high-yield junk bonds this year. Also, Goldman had been hired by Bresnan Communications Co., a cable television company Charter bought last month, to investigate an IPO -- an idea that was dropped in favor of the sale to Charter.
Trade publications have reported Charter's IPO would go to market in October.
Anita Lamont, a spokeswoman for Des Peres-based Charter, declined to comment on the IPO. She and other Charter executives were to be at the American Club in Kohler, Wis., from July 21-25 for the cable TV company's annual management retreat.
Last month at the National Cable Television Association convention in Chicago, Charter's president and chief executive, Jerry Kent, had "absolutely no comment" on the timetable for an IPO.
Barry Babcock, vice chairman of Charter, said during an interview at the cable TV convention:
"There is no timetable for an IPO in the sense that there's no decision that's been made to do an IPO. The market is the ultimate arbiter here.
"There are legal and practical reasons why an IPO doesn't make a lot of sense at this point in time. ... There's nothing that's on the books. There's nothing that's anything more than an option that's being considered right now."
In March, Charter officials reportedly told prospective investors in the junk-bond deal that they planned to take the company public.
Gary Farber, an analyst with SG Cowen, a New York investment bank, called the Charter IPO "the most anticipated deal in the cable sector -- given the properties, given the management and the cache name of Paul Allen."
"There's a scarcity value to the cable equities," Farber said, "so there's going to be strong demand."
Last July, Microsoft Corp. co-founder Paul Allen announced plans to buy Charter for $4.5 billion in cash and debt. That deal was completed in January. Once pending acquisitions are wrapped up, Charter will be the country's fourth-largest cable system operator with more than 6 million subscribers.
News reports have suggested the IPO had been delayed because of Charter's shopping spree this year -- 11 acquisitions valued at more than $13 billion.
Cablevision magazine recently reported Charter likely would have had to change or resubmit its SEC filing if it had proceeded with its original plan to go public in May.
"You're at the mercy of the SEC from a timing perspective. With the volatility of the market these days, you want to go when the market is receptive," said Jim Snowden, director of investment banking at Huntleigh Securities Corp.
"And the last thing any company wants to do is subject itself to market risk because the SEC delays approving the offering."
Charter's deal would be the second conventional IPO for a cable TV operator since 1986, when Cablevision Systems Corp. went public. Cablevision's stock closed July 21 at $73.50; the stock's 52-week range is $32 to nearly $92. Cablevision reported net revenue climbed nearly 19 percent in the first quarter.
On July 21, the stock of New York-based cable operator Insight Communications Co. hit the Nasdaq market priced at $24.50 a share. The stock opened at $25.25 and closed at nearly $29.94 a share. More than 26.3 million shares were sold.
Insight boosted the offering from 20.5 million to 23 million shares, which were expected to open at $21 to $23 each. Underwriters were given the chance to buy up to 3.4 million more shares to cover over-allotments.
The lead underwriter was Donaldson, Lufkin & Jenrette. Other underwriters were Morgan Stanley Dean Witter, CIBC World Markets, Deutsche Banc Alex. Brown and DLJdirect Inc.
Snowden said Charter and other companies are prohibited from identifying underwriters for IPOs until documents are filed with the SEC.
Bruce Leichtman, an analyst with The Yankee Group research firm in Boston, said Charter's IPO would dwarf Insight's, initially valued at $517.5 million.
One of the factors determining the success of Charter's IPO will be how investors judge the value of the company's holdings vs. the price paid for them, Leichtman said. Charter reportedly is paying about $4,500 per subscriber for Bresnan; by contrast, Allen paid about $3,400 per subscriber for Charter.
Leichtman said buying stock in Charter would be a more stable, conservative investment than buying stock in start-up Internet companies.
Tom Eagan, a cable and satellite analyst with PaineWebber in New York, said the IPO would allow Charter to tap into a hot cable market -- year to date, the Dow Jones cable/broadcasting industry group is up 44 percent -- and use proceeds to upgrade systems and roll out new services.
Leichtman estimated Charter would need to spend at least $1 billion to realize Allen's "wired world" strategy of delivering video, data and telephone services over one pipeline.
As the SEC reviews the proposed IPO, Charter executives will stage a "road show" to make a sales pitch to potential investors. An IPO marketing blitz, coordinated by the lead underwriter, lasts two to three weeks, Snowden said.
An old-fashioned road show involves one or two teams of executives visiting prospective investors in eight to 12 U.S. cities, such as New York, Boston and Chicago, and six to eight cities outside the country, including London and Paris, Snowden said. A team typically gives four to six presentations a day from breakfast through dinner, he said.
Snowden said he envisioned Charter combining the old-fashioned road show with a new means of promoting an IPO -- slide presentations and question-and-answer sessions over the Internet. Charter offers high-speed Internet access in some of its markets.
Marketing an IPO over the Internet "is so compelling in terms of its efficiency compared with the old-fashioned way, which is a physically exhausting process," Snowden said.
|
