UPDATE 3-Apollo-backed Realogy sets terms for $1 billion IPO

Fri Sep 28, 2012 3:41pm EDT

* Realogy to sell 40 mln shares at $23-$27 each

* Realogy a play on housing market rebound

* Company scheduled to go public on Oct. 11 -underwriter

By Aman Shah and Olivia Oran

Sept 28 (Reuters) - Realogy Holdings Corp, a real estate services company owned by private equity firm Apollo Management, said on Friday it expects to raise more than $1 billion in what could be the third-largest initial public offering in the United States this year.

Investors are clamoring for ways to profit from the slow recovery of the U.S. housing market, which is finally reversing its freefall, analysts said. Realogy's business includes Century 21 and Coldwell Banker.

Realogy plans to sell 40 million shares at between $23 and $27 each. At the top end of that range, Realogy would raise $1.08 billion, valuing the company at $3.51 billion.

At the level, the IPO would be behind Facebook Inc and Santander Mexico Financial Group among the biggest IPOs of the year.

Realogy carries a big debt load and has never turned a profit since 2007, when Apollo Global Management LLC led a group that took it private.

With homebuilders' shares having already soared in value this year, investors are looking to make money from other companies that will benefit from the recovery, including real estate services companies like Realogy, said Megan McGrath, an analyst with MKM Partners, a research and trading firm.

"The debate has moved away from, 'Is housing really recovering?' to 'How fast is it going to recover and what's the best way to play that?'" McGrath said.

Other companies are benefiting from this demand, or trying to. Shares of Trulia Inc, a provider of online real estate listings, soared 40 percent the day after its public offering last week.

Archstone Inc, the apartment owner and developer owned by Lehman Brothers Holdings Inc, filed for an IPO last month.

The Realogy IPO is one of the few large sales by a private equity firm this year. The investment firms, which buy companies that they typically sell years later, have been reluctant to shed holdings when the stock market has been so unpredictable.

Apollo is also set to take plastic container maker Berry Plastics Group Inc public next week in an offering that will value the company at up to $2 billion.

DEBT BURDEN

Realogy plans to use the proceeds from the offering to pay back debt. Total debt as of June 30 was $7.34 billion.

The company recorded revenue of about $4 billion in 2011, and posted a loss of $441 million.

Realogy was spun off from Cendant Corp in July 2006 and later taken private by Apollo for about $6.65 billion at the height of the housing boom. Cendant was rocked by an accounting scandal in the 1990s that it never fully recovered from.

Apollo Funds currently own about 73 percent of Realogy, while Paulson & Co has a 15 percent stake.

After the offering, Apollo's stake will dilute to about 50 percent, Realogy said in an amended filing on Friday.

The Parsippany, New Jersey-based company counts Brookfield Residential Property Inc, an affiliate of Brookfield Asset Management Inc, and RE/MAX International Inc among its competitors.

The Realogy IPO is scheduled to price on Oct. 10 with trading to begin a day later, according to an underwriter. It expects to list its shares on the New York Stock Exchange under the symbol "RLGY."

The IPO is being led by Goldman Sachs Group Inc and JP Morgan Chase & Co (Reporting By Olivia Oran in New York and Aman Shah in Bangalore; Editing by Leslie Adler)

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