Underwater-Cable Company to Float $300-Million IPO
There aren’t many companies that can bring in a former U.S. president to appear at one of its news conferences, but then there’s never been a privately owned underwater fiber-optic cable network linking the world’s largest cities.
Global Crossing Holdings, once all its undersea cables are complete, plans to operate as a so-called carrier’s carrier--a wholesaler of telecommunications service that expects to capitalize on the ever-growing demand for Internet connectivity.
These kinds of undersea networks are expensive. Global Crossing has $3 billion of projects underway.
That’s why Global Crossing, which has a holding company in Beverly Hills but its operating company in Bermuda, raised $800 million in June by selling high-yield bonds to major institutions and mutual funds in preparation for an initial public offering.
The deal, estimated at $300 million, would be one of the larger IPOs this year. It is expected to be sold through Salomon Smith Barney sometime in August.
If it sounds ambitious, that’s because this 16-month-old company has some ambitious people behind it. One co-chairman is former Atlantic Richfield chief Lodwrick Cook--he’s the one who asked his old friend George Bush, whom he met through Republican politics, to speak at a news conference in Japan unveiling plans for the company’s undersea link from that country to the U.S. The other co-chairman and the firm’s largest shareholder is Gary Winnick, who runs an investment company he founded after leaving Drexel Burnham in the mid-1980s. His current stake of about 27% would be reduced to 24% after the offering.
Other major investors include CIBC Wood Gundy Capital, a specialist in high-yield debt, and the insurance firm owned by the AFL-CIO. Because of the quiet period--the time before a public stock offering when executives cannot make public remarks seen as touting their stock--company officials could not comment on the IPO.
“There are some good investors in this deal,” said David Menlow, president of IPO Financial Network Corp. in New Jersey. “What they are putting into play here is a state-of-the-art system. There will certainly be demand for network. Whether the investment community will understand the potential here is the question.”
There are no projections yet on when the company could be profitable, but with a high-capacity network that would total about 32,000 miles when completed around 2000 and a strategy to serve Internet service providers and telecommunications companies, the company’s potential is huge, according to analysts.
To be sure, the international telecommunications industry is highly competitive, and the company faces stern competition on its routes from existing satellite providers and from other undersea cable operators, including WorldCom, which has a transatlantic system, and another system by a consortium of 14 large cable and telecommunications companies, including MCI, AT&T; and Sprint.
The company’s chief executive is John M. “Jack” Scanlon, who recently came on board after resigning in April as president of Motorola Inc.’s cellular networks and space business. Scanlon, 56, lives in Beverly Hills. He’s spent most of his working life in the telecom field, working for Bell Labs when it was the research arm of AT&T.; He started his own telecom company before joining Motorola.
Scanlon has Global stock options worth about $29 million, according to financial estimates the company filed late last week with the Securities and Exchange Commission.
The company filed to sell 21 million shares through Salomon Smith Barney, at a range of $17 to $19 a share, which would raise about $370 million. As of March 31, the company reported $1.21 billion of debt due to start-up costs. The company would trade as GBLFX on Nasdaq when it goes public.
Along with the Japan undersea link, the company’s other lines include one from the U.S. to Europe, another from New York to the Caribbean and another linking California, Mexico and Panama. So far, only its link between the U.S. and Britain is complete.
“These networks can be very profitable,” said Dan Ernst, a telecommunications consultant with the Strategis Group in Washington. “The demand is massive, and we’ve seen that people want competitive providers.”
In other IPO news last week, the market came back strongly.
Some long-anticipated deals were priced last week, including: Golden State Vintners, which went public Thursday at $17 a share through Goldman Sachs, smack in the middle of its expected price range. The stock closed virtually unchanged the first day. Natrol, the Chatsworth vitamin company, was priced at $15 a share Wednesday and rose 12.5% in its first day.
The IPO supply won’t be as heavy as expected this year since what probably would have been the year’s largest offering was pulled off the table last week when PepsiCo announced it would buy Tropicana from Seagram for $3.3 billion in cash.
The catalyst for the market comeback seemed to be Broadcast.com, the Dallas-based provider of cable news, movies and other video on the Internet, whose stock jumped 248% on its first trading day, July 17, to become the best-performing IPO ever. Actuate Software Corp., a San Mateo-based maker of systems for creating interactive multimedia documents, also had a strong showing the same day, soaring 85%.
“We’re in for a big run--we have on tap this week nearly 30 IPOs” worth more than $3.3 billion, said John E. Fitzgibbon, editor of New York-based IPO Reporter. “Including one of the biggest, Del Monte.”
The biggest planned offering from California next week is Maxtor (see Deal in the Spotlight), said Fitzgibbon, who cautioned that the Milpitas-based disk-drive maker is not likely to be a spectacular performer in the short term.
For the kinds of numbers posted by Broadcast.com, watch for upcoming California tech deals such as GeoCities, EBay and CitySearch by the end of the summer.
Analysts such as Tom Taulli, research director of IPO Monitor in Calabasas, are expecting GeoCities, which runs advertising-supported Internet “communities,” to prove as successful as Broadcast.com because it is one of the top Web sites by traffic, and unique among the top 10 sites--it isn’t yet publicly owned.
Note: IPOs are speculative investments designed for sophisticated investors prepared to take high risks. First-time stock offerings by fast-growing companies also can be extremely difficult for the average investor to buy.
*
Debora Vrana covers investment banking for The Times. She can be reached at debora.vrana@latimes.com.
Tracking the Deals
IPO Indexes
These indexes from IPO Monitor track the market for initial public offerings by measuring the performance of 30 IPOs nationwide and 10 IPOs by California-based companies. A score of 30.9, for example, indicates that shares have risen by a mean of 30.9% from the IPO price. Inktomi’s big run-up has skewed the California scale in recent weeks.
Last week’s IPO conditions
California: Exceptional
National: Strong
*
California 58.95
U.S.: 18.3
*
Rating system
Less than 10: Poor
10-15: Normal
16-20: Strong
21-25: Outstanding
26 or more: Exceptional
Deal in the Spotlight
Maxtor Corp., the Milpitas-based hard-disk-drive maker, will be one of the largest IPOs by a California-based company if it sells a $450-million deal this week as expected. A subsidiary of Hyundai Electronics America, Maxtor reported revenue of $531 million for the second quarter ending June 30 and profit of $5.4 million, an improvement from the same time last year when it posted revenue of $283 million and a loss of $46.6 million. This has been a tough time for the hard-drive industry, and some analysts questioned the timing of spinning off Maxtor, which Hyundai bought in 1996. “Hyundai is sitting in the middle of that storm in Asia--and half of this deal will go to pay back Hyundai,” said John E. Fitzgibbon of IPO Reporter in New York. “Temperature reading on this one is tepid. No moon shot here.”
* Name: Maxtor Corp.
* Headquarters: Milpitas
* Industry: Hard-drive maker
* Size: $450 million
Who’s Raising Money and How
Upcoming Deals
Company: Team Communications
Ticker symbol: TMTV
City: Los Angeles
Industry: Media
Size, in millions: $10.5
Offering: IPO
Estimated share price: $5.50-7
Underwriter: National Securities
Est. week: 7/27
*
Company: Echelon
Ticker symbol: ELON
City: Palo Alto
Industry: Tech
Size, in millions: $45.0
Offering: IPO
Estimated share price: $7-9
Underwriter: NationsBanc Mont.
Est. week: 7/27
*
Company: Gary Player Golf
Ticker symbol: PLYR
City: Santa Maria
Industry: Golf
Size, in millions: $13.6
Offering: IPO
Estimated share price: $8
Underwriter: Whale Securities
Est. week: 7/27
*
Company: Pacer International
Ticker symbol: PACR
City: Lafayette
Industry: Transport.
Size, in millions: $38.0
Offering: IPO
Estimated share price: $11-13
Underwriter: BT Alex. Brown
Est. week: 7/27
*
Company: Maxtor
Ticker symbol: MXTR
City: Milpitas
Industry: Tech
Size, in millions: $451.0
Offering: IPO
Estimated share price: $8.50-10.5O
Underwriter: Salomon
Est. week: 7/27
*
Company: Del Monte Foods
Ticker symbol: DLM
City: San Francisco
Industry: Food
Size, in millions: $270.0
Offering: IPO
Estimated share price: $16-18
Underwriter: Morgan Stanley
Est. week: 7/27
*
Company: IDG Books Worldwide
Ticker symbol: IDBG
City: Foster City
Industry: Publishing
Size, in millions: $50.0
Offering: IPO
Estimated share price: $TBA
Underwriter: Morgan Stanley
Est. week: 7/27
*
Company: Micromuse
Ticker symbol: MUSE
City: San Francisco
Industry: Tech
Size, in millions: $110.3
Offering: IPO
Estimated share price: $36.75
Underwriter: CS First Boston
Est. week: 7/27
*
Company: Catapult Commun.
Ticker symbol: CATT
City: Mountain View
Industry: Tech
Size, in millions: $33.5
Offering: IPO
Estimated share price: $9-11
Underwriter: Hambrecht & Quist
Est. week: 8/3
*
Company: CitySearch
Ticker symbol: CTYS
City: Pasadena
Industry: City guides
Size, in millions: $48.0
Offering: IPO
Estimated share price: $11-13
Underwriter: NationsBanc Mont.
Est. week: 8/3
*
Company: Presidio Golf Trust
Ticker symbol: GOF
City: San Francisco
Industry: Real estate
Size, in millions: $130.0
Offering: REIT
Estimated share price: $19-21
Underwriter: Salomon
Est. week: 8/3
*
Company: Troy Group
Ticker symbol: TROY
City: Santa Ana
Industry: Printing
Size, in millions: $17.0
Offering: IPO
Estimated share price: $7-9
Underwriter: Cruttenden Roth
Est. week: 8/3
*
Company: GeoCities
Ticker symbol: GCTY
City: Santa Monica
Industry: Tech
Size, in millions: $74.2
Offering: IPO
Estimated share price: $TBA
Underwriter: Goldman Sachs
Est. week: 8/10
Recent IPOs
Company: Inktomi
Ticker symbol: INKT
City: San Mateo
Industry: Tech
Size, in millions: $36.0
Date: 6/10
Share price on 7/24: $57.50
Pct. change: +219.0%
Underwriter: Goldman Sachs
*
Company: NetGravity
Ticker symbol: NETG
City: San Mateo
Industry: Tech
Size, in millions: $27.0
Date: 6/12
Share price on 7/24: $21.13
Pct. change: +135.0
Underwriter: BancAmerica R.S.
*
Company: Restoration Hardware
Ticker symbol: RSTO
City: Eureka
Industry: Retail
Size, in millions: $52.8
Date: 6/19
Share price on 7/24: $34.50
Pct. change: +81.0
Underwriter: Goldman Sachs
*
Company: Actuate Software
Ticker symbol: ACTU
City: San Mateo
Industry: Tech
Size, in millions: $30.0
Date: 7/17
Share price on 7/24: $16.88
Pct. change: +53.0
Goldman Sachs
*
Company: Natrol
Ticker symbol: NTOL
City: Chatsworth
Industry: Vitamins
Size, in millions: $59.1
Date: 7/22
Share price on 7/24: $17.81
Pct. change: +19.0
Underwriter: Adams Hines
*
Company: Horticulture
Ticker symbol: HORT
City: Irvine
Industry: Nursery
Size, in millions: $56.1
Date: 6/23
Share price on 7/24: $11.00
Pct. change: 0.0
Underwriter: Lehman Bros.
*
Company: Golden State Vintners
Ticker symbol: VINT
City: Greenbrae
Industry: Wine
Size, in millions: $73.1
Date: 7/21
Share price on 7/24: $17.00
Pct. change: 0.0
Underwriter: Goldman Sachs
*
Company: HarknessAurora Foods
Ticker symbol: AOR
City: San Francisco
Industry: Food
Size, in millions: $259.0
Date: 6/25
Share price on 7/24: $19.00
Pct. change: --10.0
Underwriter: Goldman Sachs
Sources: IPO Monitor, Securities Data, IPO Financial Network
The Top 10 / Technical Invasion
Sub-$1,000 PCs and virtual reality are among the top 10 technologies that online-content company CNet predicts will “take over” in the next 15 years:
Rank: 1
Technology: Computer implants
The catalyst: Consumer acceptance of computers
Takeover date: 50 years
*
Rank: 2
Technology: Virtual reality
The catalyst: Advances in holography
Takeover date: 10 to 15 years
*
Rank: 3
Technology: Wearable PCs
The catalyst: Lower prices, more processing power
Takeover date: 10 to 15 years
*
Rank: 4
Technology: Speech recognition
The catalyst: Faster processors
Takeover date: 10 years or more
*
Rank: 5
Technology: Flat panel displays
The catalyst: More U.S. manufacturers
Takeover date: 5 years
*
Rank: 6
Technology: Internet-cum-TV
The catalyst: TV networks support “progressive scanning” format
Takeover date: 5 years
*
Rank: 7
Technology: Wireless communicators
The catalyst: Integration of cellular networks
Takeover date: 3 years
*
Rank: 8
Technology: XMTL (Extensible Markup Language)
The catalyst: Vocal Web developers
Takeover date: 2 to 3 years
*
Rank: 9
Technology: E-commerce
The catalyst: Consumer word of mouth
Takeover date: This year
*
Rank: 10
Technology: Sub-$1000 PCs
The catalyst: More sales to first-time buyers
Takeover date: Now
Source: CNet
