IPO Plan Marks New Era for DVD Express--and ING Barings

ING Baring Fuhrman Selz has grown in Southern California in recent years by adding bankers to its Los Angeles office and steadily increasing its share of the merger advisory business for mid-size firms.

Now, the division of one of Europe’s largest banks is moving to extend that success to the hot market for initial public offerings, or IPOs. The test may be an upcoming $57.5-million first-time stock sale by DVD Express Inc., a Hollywood-based Internet retailer. ING Barings is the deal’s lead underwriter.

Formed in 1997, DVD Express is a Web-based retailer of movies and videos in the digital format known as DVD. The firm, which has about 70 employees, operates an online store and has marketing agreements with America Online Inc., Infoseek Corp. and Compaq’s Alta Vista unit.

With the increasing popularity of the DVD technology, the company’s revenue rose to $16.9 million in 1998 from $1.3 million the year before. The company reported a net loss of $4.4 million in 1998, compared with a $141,590 loss in 1997.

Michael Dubelko, 46, a former television executive responsible for such shows as “The A-Team” and “21 Jump Street,” is chairman and chief executive of DVD Express. He owns 84% of the firm, while AOL holds 7.2%, according to the company’s recent filings. The firm did not reveal a likely per-share price or what percentage of the company will be sold to the public.

“I like what I see on this one so far,” said David Menlow, head of IPO Financial Network, a New Jersey data tracker. “America Online is a shareholder and this very possibly could be an acquisition candidate.”

Although DVD movies are “only one shelf in the video store right now,” and less than 1% of U.S. households use the DVD format, the industry is expected to keep growing, Menlow said.

Company founder Dubelko is betting that as more DVD drives, bundled with new computers, show up in American homes, the demand for DVD products will rise.

ING Barings is part of ING Groep, Europe’s third-biggest bank by market value. The Amsterdam-based financial services company has recently absorbed a string of acquisitions. In 1995, the group acquired the failed London securities firm Barings. ING acquired the U.S. investment bank Furman Selz in 1997 and Belgium’s Banque Bruxelles Lambert in 1998.

ING, which bases its corporate finance advisory group out of New York and Los Angeles, concentrates on middle-market transactions, meaning mostly merger advisory and private placement financings for mid-sized firms in deals ranging from $50 million to $500 million.

The Los Angeles office, headed by Managing Director Mark Viderguaz, 45, includes 10 bankers, up from just five two years ago.

“Southern California is really flourishing,” said Bruce Pompan, 36, a director with ING. “People out of Disney, people out of Mattel are creating some interesting content companies on the Internet. Everyday, I see another one.”

In the last 12 months the Los Angeles bankers have completed $3.5 billion in total transactions, a combination of public equity and debt, merger advisory and private placement deals.

The firm’s recent deals include an $8.5-million private placement for Culver City-based Modacad Inc., a Web-based fashion merchandiser. And ING was recently selected to underwrite a $100-million high-yield debt financing for an undisclosed company owned by a Los Angeles-based buyout fund, Viderguaz said.

ING Barings is moving into more IPOs and secondary, or follow-on, equity deals, said Viderguaz, although so far it has completed few IPOs as lead manager.

The DVD Express deal will be only its second lead-managed IPO this year. Its other offering, a $50-million deal for Albany, N.Y.-based Albany Molecular Research, was priced in February at $20 a share. The stock was up about 18% as of last week.

ING bankers could not talk about the DVD deal because of the “quiet period” imposed by the Securities and Exchange Commission before any offering.

“This underwriter’s last deal succeeded in spite of itself,” Menlow said, noting that Albany Molecular wasn’t in a hot industry like the Internet. “So, we would be surprised if DVD would not do well given its sector.”

The firm’s newest acquisition, Furman Selz, completed just two IPO deals as lead manager in 1998--and they were down an average of about 75% for the year through last week, according to Securities Data Co.

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The Times’ Investment Strategies Conference, to be held May 22-23 at the Los Angeles Convention Center, features a panel on IPO investing moderated by California Dealin’ columnist Debora Vrana. For registration information, call (800) 350-3211 or visit https://www.latimes.com/isc. Time staff writer Debora Vrana can be reached at debora.vrana@latimes.com or by mail at Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.