DT's bond deal could signal Net2Phone IPO
Analyst says $100 million buyback indicates
offering
By Steve Gelsi, CBS MarketWatch
Last Update: 4:06 PM ET Mar 31, 1999
Internet Daily
IPO Daily Report
HACKENSACK, N.J. (CBS.MW) -- A move by IDT to buy
back $100 million in its bonds could signal an IPO of its
Net2Phone Internet phone business in the near future, an
analyst said Wednesday.
IDT (IDTC) has yet to file for an initial public offering for
Net2Phone, although it's been expected for months. See
related story.
"This is something they've talked about
for a while, but now they're putting the
pieces in place," said Riyad Said, an
analyst with Friedman Billings Ramsey.
Shares of the telecommunications
company rose 1 3/16 to 18 on
Wednesday.
No longer bound by bonds
By buying back bonds, IDT will free
itself to pursue other forms of financing
for Net2Phone, he said. The most likely
scenario would be to offer investors a
share of the company in an initial offering of stock.
An IPO of Net2Phone, along with the company's Internet
service provider business, would help IDT realize the value
of its Web telephony assets, he said. See PSE technology
stocks.
The company's stock price doesn't fully
reflect the value of Net2Phone, which has
alliances with Yahoo and Netscape,
according to Said.
Based on the high valuations of Internet
companies on Wall Street, Said estimated
a market cap of about $400 million for the
spinoff vs. IDT's $420 million market
cap.
Fishing for red herring
Ray Cuello, a fund manager for the
Investment Center Inc., said IDT appears
to be "very close" to filing its IPO. "The
red herring may be done by now," he
said. A red herring is a company's
prospectus just before an IPO.
On Monday, IDTC launched a tender
offer for $100 million of its 8.75 percent
senior notes due 2006. The purchase price
for the notes will be $1,020 in cash per
$1,000 principal amount, plus interest.
The company also said it secured a $150 million
commitment from Banker's Trust, CIBC Oppenheimer and
Lehman Commercial Paper Inc. to help purchase the bond
notes.
In a press release, IDT said it's buying the bonds, "for the
purpose of enabling IDT to effect one or more possible
financing transactions involving Net2Phone."
Steve Gelsi is a reporter for CBS MarketWatch. |
