From CBS Market Watch:
Comdisco on IPO track
By Lisa Sanders, CBS MarketWatch
Last Update: 6:45 PM ET Jan 11, 2000
NewsWatch
CHICAGO (CBS.MW) -- Comdisco officials said Tuesday that the company may come t market with an initial public offering for its Prism Communications business in the spring and plans to announce its decision on Jan. 25 at its annual shareholders meeting. Chicago-based Comdisco, a technology services firm with four core businesses, announced in December that it would issue a tracking stock for Comdisco Ventures, pending approval from the Securities and Exchange Commission.
Once that happens, Comdisco (CDO: news, msgs) will file an S-1 with the SEC, seek shareholder approval, and embark on offering road show. The IPO is expected to hit the market in the spring, John Vosicky, Comdisco's chief financial officer, told CBS.MarketWatch.com.
The overriding reason behind both IPOs is to increase the value of Prism and Comdisco Ventures, Vosicky said.
Prism, which offers high speed Internet access and integrated voice and data products, differs from competitors such as North Point Communications in that it offers a transparent service to subscribers, Jim Hyland, Comdisco's senior vice president of investor relations, told CBS.MarketWatch.com.
Customers of Prism access the Internet and the phone over one line, and they receive one bill for all services. Although the service is currently offered in only the New York City metropolitan area, Prism intends to roll out its products to 33 markets by the end of March, Vosicky explained.
"We've put a significant amount of infrastructure into this business in the last several months, and we believe there is significant value," Vosicky said. "We'd like to monetize these assets."
What has yet to be decided is whether Comdisco will issue a
tracking stock for Prism or go with a straight IPO, which isn't subject to shareholder approval. The issue is being discussed with Comdisco's board this week. The size of the IPO is expected to equal about 20 percent of the value of the company, the size of which Comdisco declined to divulge.
RGR Financial Corp., which raised its 12-month price target on Comdisco to $62 from $40 on Jan. 4, expects the company to raise $200 million with the Prism IPO.
"We estimate that Prism Communication's market value as an
independent company could exceed $3.5 billion, or $22 in the after market for CDO shareholders," RGR analyst Joseph DiLustro wrote. The figures are based on RGR's expectation that Comdisco will retain an 80 percent interest in the company.
In regard to Comdisco Ventures, Comdisco plans to size the IPO to about 15 percent of the business' value, again the amount of which was not disclosed. RGR expects the company to raise $200 million with the issuance of the tracking stock.
Comdisco Ventures owns equity interest in more than 400 companies, which comprise the Internet, biotechnology, and communications sectors. About 80 of the companies are
publicly-owned with a value to Comdisco of about $400 million. Another 350 companies are now private but some intend to go public in the future, Hyland said.
"The purpose of the IPO is to track a business that we feel is not being fully understood by the market," Hyland said. "We've been in this business for about 13 years, but it's really taken off over the last 3, which is not reflected in our stock price. One way to get the market to understand is to issue the tracking stock. As we put the information in the marketplace, I think people will be able to appreciate the value of Comdisco Ventures."
Following the IPO, Comdisco intends to spin off the rest of the company to shareholders later in the year or in early 2001, although a decision has not been reached, Vosicky noted.
RGR Financial believes that the post-IPO market value of Comdisco Ventures should approach $3.5 billion, again based on an probable 80 percent interest held by Comdisco.
"The IPO proceeds of approximately $200 million, plus unrealized gains from 80 companies of over $400 million (on a mark-to-market basis as of year-end) and $35 million from the
Venture's leasing portfolio should provide the new independent company with start-up equity of $635 million," wrote DiLustro.
DiLustro added that "under current market conditions, we believe that eventually 30 percent or more of the 350 private companies could be worth a substantial sum."
Comdisco is a technology services firm that, in addition to Prism and Comdisco Ventures, owns a technology services business, which offers disaster recovery and managed network
offerings, and a financial leasing company for communications, laboratory scientific, semiconductor, and medical equipment.
Shares of Comdisco closed Tuesday's session at 34 9/16, up 7/8, or 2.6 percent. |
