Infonet Hopes to Raise $710 Million in Stock Debut

Infonet Services Corp., an El Segundo-based communications and computer networking company, unveiled plans Wednesday to raise more than $710 million in an initial public stock offering that would be one of the largest in Southern California history.

Infonet, a 30-year-old company that was formerly a subsidiary of Computer Sciences Corp., specializes in providing voice and data networking services for companies with overseas operations. The company has 824 employees.

If its offering succeeds, the privately held company could have an initial market value exceeding $9.2 billion.

“That’s huge,” said Gail Bronson, senior analyst at IPO Monitor, a Silicon Valley firm that tracks high-tech stock offerings. “It’s also a fabulous time to be planning an IPO if you’re in the telecommunications of Internet-related businesses.”

Infonet executives declined to comment on the offering. But documents the company filed with the Securities and Exchange Commission indicate that it plans to offer about 51.2 million shares at a price expected to fall between $18 and $21 per share.

If Infonet raises $710 million as planned, the offering would dwarf most high-tech IPOs. OpenTV, for instance, recently raised $150 million, while Idealab, the Pasadena-based Internet business incubator, is said to be planning an offering that would raise more than $100 million.

Even so, other recent technology offerings have been far larger. Agilent Technologies Inc., the testing and measurement company spun off by Hewlett-Packard Co., raised more than $2 billion in its recent offering.

Analysts said that although Infonet is not well-known in the United States, it has a long history of serving multinational corporations, especially in Europe and Africa.

Infonet says it provides services to more than 1,100 companies, including such heavyweight corporations as Microsoft Corp., Volkswagen, Nestle and Nokia.

In its filing, Infonet says it competes with AT&T;, Global One, MCI Worldcom and a host of other telecommunications companies. It also warns that suppliers including Cisco Systems Inc. and Nortel Networks may also become rivals.

The company was founded in 1969 as a wholly owned subsidiary of Computer Sciences Corp. But through a series of deals completed in the early 1990s, according to SEC filings, Computer Sciences sold Infonet to a group of six international telecommunications companies, each of which owns about 16% of Infonet.

The international ownership group includes KDD Corp. of Japan, Telia of Sweden, Swisscom of Switzerland and Telefonica International of Spain.

That international partnership is akin to other telecommunications ventures, such as Global One (Sprint, Deutsche Telekom and France Telecom). And like others, Infonet has suffered from its complex ownership structure and the lack of a unifying strategy, analysts said.

“This whole business is a tricky one when you have so many companies involved,” said Roger Wery, a telecommunications analyst at Renaissance Worldwide Inc. “And there is increasing competition in that space.”

But Wery noted that given the recent successful initial public offerings by TeleGlobe and Equant, it’s not surprising that Infonet would try to tap Wall Street’s current enthusiasm for all things telecom.

“Right now, this is a me-too product, with maybe not as advanced an infrastructure as others, but they potentially have a more advanced sales structure, and that might help,” Wery said.

Infonet said it plans to use the proceeds of the sale to expand its network infrastructure, which already reaches 180 countries. But the offering would also enrich a number of top Infonet executives.

Jose A. Collazo, chairman of the company since 1988, owns 133,000 shares of common stock that could be worth as much as $2.8 million based on the $21 target price. According to the company’s SEC filings, Collazo is also scheduled to be paid a salary of $353,998 this year, plus a bonus of nearly $300,000 and “other compensation” valued at $378,000.

Ernest U. Gambaro, senior vice president and general counsel of Infonet, holds 56,000 shares that could be worth $1.18 million, and is to be paid a salary of $199,222 this year.

Infonet reported revenue of $303 million for the year that ended March 31, up 3% from $294 million a year earlier. It also reported an annual profit of $4.68 million, compared with a loss of $5.43 million a year earlier.

The underwriters of the offering are Merrill Lynch Inc. and Warburg Dillon Read. The stock will trade on the New York Stock Exchange.