April 9, 2010 / 2:55 PM / 10 years ago

UPDATE 2-Toys R Us, other private equity-backed IPOs line up

* Toys R Us, HCA IPOs under consideration - sources

* Timing of Toys IPO depends on strength of retail market (Recasts first paragraph; adds details about NXP, IPO market, Dunkin Donuts speculation, bylines)

By Megan Davies and Clare Baldwin

NEW YORK, April 9 (Reuters) - A spate of initial public offerings, including ones by retailer Toys R Us [TOY.UL] and healthcare firm HCA, is likely imminent as private equity firms comb their portfolios to see which investments are ripe to take public, sources familiar with the situation said.

The window for private equity exits reopened late last year after a long drought during the financial crisis. Kohlberg Kravis Roberts & Co [KKR.UL] took advantage of the rising markets by taking discount shopping chain Dollar General (DG.N) public in November, and the retailer has climbed since the offering.

While the market was volatile earlier this year and a number of private equity-backed companies either postponed or changed IPO plans, it has improved dramatically over the last several weeks, with several offerings pricing above the expected range and trading higher in their debut.

Other portfolio companies that have been considered for months are now looking more likely, such as Toys R Us, sources said, and could be taken public this year. Toys R Us was bought by Kohlberg Kravis Roberts & Co, Bain Capital and Vornado Realty Trust (VNO.N) in 2005 for $6.6 billion.

Dutch semiconductor company NXP, owned by private equity investors including KKR, Silver Lake and Bain Capital, is also planning an IPO, two people familiar with the matter previously told Reuters.

Plans to take HCA public are advancing, sources said, with plans to interview banks in the coming weeks to put together an underwriting group. An IPO had not been pursued earlier as the outcome of the U.S. healthcare debate was so uncertain, sources previously told Reuters.

KKR is valuing the HCA investment at nearly double its cost, according to its fourth quarter earnings report.

The timing of a Toys R Us offering depends on the strength of the IPO and retail markets, said the sources who requested anonymity because the talks are not public.

Any offering would likely be heavily sold on the basis of strong Christmas sales. Last month, Toys R Us posted higher fourth-quarter earnings as strong sales of toys offset weak demand for video games in the holiday shopping season.

Analysts and economists said on Thursday that underlying consumer spending was accelerating after six months of modest growth.

Private equity portfolio companies are routinely considered for IPO targets. Institutional investors typically like private equity-backed IPOs because they are larger and more mature companies, Josef Schuster, founder of Chicago-based research house IPOX Schuster LLC, said.

Other private equity-backed firms that observers have been watching include Dunkin Donuts, bought by Bain, Carlyle and Thomas H. Lee Partners in 2005.

While the market has improved in the past few weeks, private equity-backed IPOs have lagged overall IPO performance in the United States, according to Thomson Reuters data.

All the private equity firms declined to comment or were not available for comment. (Additional reporting by Jessica Hall; Editing by Dave Zimmerman, Lisa Von Ahn and Richard Chang)

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