* IPO more than 50 percent of enlarged share capital
* Selling $225 million worth of new shares to GIC
* Bookbuilding Feb. 1-11, listing Feb. 12 - source
* Net debt-to-EBITDA to fall to 3.5 times from 6.5 - source
(Adds details, valuations, peer comparisons)
By Daisy Ku
LONDON, Jan 19 (Reuters) - New York-based travel service company Travelport launched a $2 billion initial public offering (IPO) on Tuesday to cut debt, with more IPOs on the way as private equity houses seek to offload companies they own.
The IPO, the biggest in London since New World Resources'NWRS.L $2.5 billion deal in May 2008, values the company at least $3 billion and paves the way for an eventual exit of private equity house Blackstone.
Travelport, which provides travel services such as wholesale hotel bookings, aims to sell $1.775 billion worth of new shares in the listing on the London Stock Exchange (LSE).
The Government of Singapore Investment Corp (GIC) will buy $225 million worth of new shares at the same time as the IPO, which will give it a 7.19 percent stake in the firm.
Travelport is selling more than 50 percent of its enlarged share capital, and will see its net debt level drop to $2.3 billion after the listing from $4.1 billion, Chief Executive Officer Jeff Clarke said during a call with reporters.
The ratio of net debt to earnings before interest, debt and amortisation of goodwill (EBITDA) will be reduced to 3.5 times from 6.5 times now, a person close to the company said, and in the long run to 1.5 to 2 times.
The deal values Travelport at about 14 times 2010 earnings and 8 to 9.5 times enterprise value to EBITDA, in line with peers’ 15 times price-to-earnings ratio and 9 times EV/EBITDA.
CEO Clarke said Travelport picked the LSE for a listing because the bourse attracts global investors and as a large part of its clients are based in Europe.
Travelport’s IPO is likely to be part of many similar deals from private equity firms that want to exit acquisitions they made at the height of the credit boom, bankers said.
Travel reservations firm Amadeus in Spain, controlled by BC Partners [BCPRT.UL] and Cinven [CINV.UL], is preparing for a listing in the first half, while private equity backers of Denmark’s leading telecom firm TDC are planning a full exit [ID:nLE362679][ID:nLDE60D1LJ].
NOT SO FAST
Blackstone -- which bought the company from U.S. conglomerate Cendant in 2006 and owns a 70 percent stake -- and other shareholders may later sell existing shares, but only if a 15 percent overallotment option is exercised. This is in marked contrast to more audacious exits in the boom years.
Buy-out houses offloaded companies rapidly through the IPO market until the middle of 2007, but reluctant investors are now forcing them to hold stakes in companies after they list, to align the interests of both parties.
“When they are looking at the IPO market at the moment, they are not looking at it as a mechanism for an immediate exit,” a London-based banker said.
“It’s more a mechanism to enhance the capital structure of the asset they have exposure to and over time providing a pathway to exit.”
French nursing home Medica, which is raising 250 million euros in an IPO, is using a similar structure, whereby its private equity backers only sell existing shares in an overallotment option.
Travelport had been pre-marketed in 2008 but it never went ahead with a listing because of poor market conditions, a source told Reuters in December.
There was also a poor reaction when buy-out house Hellman & Friedman sought to reduce its stake in fund manager Gartmore through an IPO last month.
Travelport will start its bookbuilding process on Feb. 1, while shares are expected to begin trading on Feb. 12, a person close to the deal said.
UBS is the sole sponsor for the deal, while Credit Suisse, Deutsche Bank, Barclays Capital and Citigroup are joint bookrunners. (Additional reporting by Simon Meads; editing by Douwe Miedema, Louise Heavens and Karen Foster)