The 2005 IPO season jumps into high gear next Thursday with the billion-dollar launch of Celanese Corp, an industrial chemicals producer owned by private equity firm The Blackstone Group. But those hoping 2005 will be another bumper year for US initial public offerings may want to look more closely at smaller deals such as biotech company ViaCell, for a clearer gauge on whether expectations will be fulfilled, experts said.
Some IPO trackers said they were mildly concerned that most of the proceeds from Celanese's IPO - one of the biggest listings since Google's $1.7 billion IPO last August - will be used to pay back Blackstone, rather than going into the company's coffers.
In addition, a lackluster start to the year for stocks on Wall Street, concerns about Iraq's elections and uncertainty about the direction of US interest rates are all weighing on initially bullish sentiment in the IPO market, they said.
"I'm not hearing a lot of buzz on the Celanese deal right now," said Sal Morreale, a trader who tracks IPOs for Cantor Fitzgerald in Los Angeles. "Looking at how fragile the equity markets are, it may be a problem getting out a 50-million share deal."
Blackstone completed its 1.6-billion euro acquisition of Celanese last April and will likely delist it from the Frankfurt bourse after a 41.92 euro offer for all outstanding shares. Including debt and other obligations, the company was valued at 3.1 billion euros.
Celanese set its US IPO of 50 million Series A common stock at $19 to $21 per share, and expects to raise $949 million in net proceeds. The deal is being lead-managed by Morgan Stanley, Lehman Brothers, Banc of America Securities, UBS Warburg and Goldman Sachs.
The Dallas, Texas-based company plans to list on the New York Stock Exchange under the symbol "CE" and after the deal is done will pay Blackstone, the majority holder of its Series B common stock, a $952 million special dividend.
Kyle Loughlin, a credit analyst with Standard & Poor's, said the Celanese IPO coincides with an upturn in the chemicals market and low interest rates that take the pain out of the debt load taken on as part of Blackstone's buyout.
"The chemicals cycle has turned up and this company enjoys renewed pricing power and has been able to improve profits despite the ongoing pressures of raw materials," Loughlin said. "The outlook looks favourable so that investors should take comfort."
"People don't mind taking companies into their portfolios if they know that the company will directly benefit from the proceeds of the offering," said David Menlow, president of IPOfinancial.com.
"If the money is going upstream to the shareholders of the parent companies or private equity firms who will at some point also be looking to unload their stock. This is not what investors want."
Cantor Fitzgerald's Morreale said the market appeared to be paying more attention to ViaCell Inc's 7.5 million share, $60 million listing, also on Thursday, which could offer more immediate upside potential.
Amgen Inc, a US biotech leader, has a $20 million stake in ViaCell, which is seeking cures for diseases like cancer through stemcell research, and that partnership with an established firm should assure investors.
Stemcell research is also one of the hottest prospects in biotechnology and considerable media coverage could whet appetites, Morreale said.
In general terms, IPO trackers said it was too early - and the economic outlook too murky - to cast judgement on how active 2005 will be for new listings despite optimism after 2004 saw 254 deals worth $52.2 billion - a strong recovery from 85 deals worth $17.8 billion the year before.
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