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HP Joins IPO Spinoff Mania
by Joanna Glasner
3:00 a.m. 12.Nov.1999 PST
Hewlett Packard is poised to add a billion or so dollars in paper wealth to its coffers within the next few days. But the money won't come from selling computers.
The Palo Alto, California, maker of PCs and printers is planning to make money the same way every good Silicon Valley company does these days: It's having an IPO.
As early as next week, Hewlett Packard is set to spin off Agilent Technologies, a unit that develops measurement devices for electronic and communications devices, in an initial public offering.
If all goes as planned, the IPO will raise about US$1.2 billion. That would give Agilent -- 87 percent of which is owned by HP -- a stock market value of more than $9 billion.
Hewlett Packard's IPO plan for Agilent is nothing new. Several large companies have profited by spinning off units as separate publicly traded companies.
On Wednesday, shares of Microsoft's online travel spinoff, Expedia.com, nearly quadrupled in first-day trading. In July, Swiss drug giant Roche Holding completed the ninth-largest IPO in US history, when it took biotech giant Genentech public in a $1.9 billion offering.
And let's not forget the biggest spinoff of all:Lucent Technologies, now valued at $230 billion, which separated from AT&T and went public in 1996.
Hot IPO market aside, analysts say it makes strategic sense for Hewlett Packard to spin off Agilent. For a big, diverse enterprise like HP, the parts of the company traded separately may be worth more than the whole, said Wendy Abramowitz, an analyst with Argus Research.
"I think the basic reasoning behind it was to look at Hewlett Packard in two different ways," Abramowitz said. "The valuations of the computer hardware and imaging business are very different from the other components of Hewlett Packard."
It also helps that Agilent is actually profitable. In the first nine months of the year, Agilent had revenue of $5.9 billion and a profit of $366 million. Agilent says it plans to pass on a chunk of the proceeds from the IPO as a dividend to Hewlett Packard.
The planned offering comes on the heels of an extraordinarily busy week for initial public offerings. In the past few days, investors have seen their liquidity stretched close to the limit with a string of weighty IPOs, led by UPS and Paul Allen's Charter Communications. |
