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<<Goldman Invites Long List to Its IPO Party
By Gregg Wirth
Staff Reporter
4/6/99 8:31 PM ET
Invitations have been mailed for Goldman Sachs' IPO, for which Wall Street has been waiting since last year.
Wall Street's last major private partnership next Tuesday is expected to release a preliminary prospectus, called a red herring, for its upcoming IPO that reveals the firms selected to bring Goldman to market, according to one banker who has seen the list.
The list of 13 underwriters, led by Goldman, includes almost every big investment house on Wall Street. Sharing the top of the list are Donaldson Lufkin & Jenrette (DLJ:NYSE), Merrill Lynch (MER:NYSE) and Morgan Stanley Dean Witter (MWD:NYSE), which represent the qualified independent underwriter committee. That group represents the other underwriters in the IPO and will undertake the due diligence process of Goldman's books.
Goldman plans to sell 69 million shares at around 50 per share to raise about $3.45 billion in what would be the largest IPO of the year, according to its most recent filing with the Securities and Exchange Commission. That share price range would value the company at about $23.5 billion.
The rest of the co-managing slots went to Bear Stearns (BSC:NYSE), Citigroup's (C:NYSE) Salomon Smith Barney unit, Credit Suisse First Boston, Lehman Brothers (LEH:NYSE), J.P. Morgan (JPM:NYSE), PaineWebber (PWJ:NYSE) and Prudential.
Two boutique firms, Sanford Bernstein and Schroder, also won slots because of their research prowess, according to two other investment bankers. Bernstein, for example, is the home of Sallie Krawcheck, the investment banking sector analyst ranked No. 1 by Institutional Investor.
Not surprisingly, Goldman named itself as lead banker on the deal. "We gave them a good run for the top spot, but in the end Goldman chose itself as lead," jokes the investment banker.
The equity desks of the investment banks in the underwriting list were contacted, and four bankers, all of whom requested anonymity, confirmed the contents of the list. The rest didn't return calls. A Goldman Sachs spokesman declined to comment.
Another investment banker at a firm that will be involved in the IPO says the firms were told that there would be three main underwriting groups: a U.S. group, a European group and an Asian group. Goldman told firms that no single bank would be in any more than one underwriting group, the banker says.
That may explain why Bankers Trust (BT:NYSE) was left off the list of U.S. underwriters. BT, which is being acquired by Deutsche Bank, would likely be on the European underwriter list, two bankers say. It couldn't be determined which banks were on the European or Asian underwriting lists.
Still, leaving off the combining Deutsche/BT was a surprising omission, the first banker says. "I think this was a huge slap in the face to BT," says the banker. "Especially since this will be viewed as a list of who is viewed as meaningful on the Street."
There has been no mention of fees yet, but it is expected that they will be in line with an IPO of similar size and stature. IPO fees can range from 4% to 5% or less on large deals, and the lead underwriter can often take up to half of those fees traditionally. However, there have been no details on how Goldman would divide the fees among its fleet of managers, several bankers say. "I think Goldman is going to do what is appropriate," says one.
Many factors go into a decision about which firms will co-manage an IPO, says a third banker, whose firm will also be involved in the IPO. Research ability, distribution capability and relationships go into the mix, he adds.
And, like a family funeral, an issue as large as Goldman's -- perhaps the last of a Wall Street bank of its size -- forces firms that may not like each other to work in harmony, he says. "Wall Street firms have to deal with each other as competitors and customers when they trade," he says. "You may not like a firm as a competitor, but you may need them as a customer."
The list of Goldman's underwriters made no mention of either Wit Capital, an online investment bank, or E*Trade (EGRP:Nasdaq), an online brokerage.
Goldman last week announced an agreement to acquire a 22% stake in Wit for an undisclosed sum. A Wit spokesman didn't return calls. Goldman has given E*Trade customers access to some of the IPOs it has brought public, and each company has a 25% stake in Archipelago, an electronic communications network. An E*Trade spokeswoman didn't return phone calls.
Goldman is expected to kick off a global roadshow for its IPO in Tokyo, beginning at the end of this month.
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