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IPO euphoria still in play
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April 20, 1998: 2:53 p.m. ET
Some attractive deals this week following exhilaration over Broadcom
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NEW YORK (CNNfn) - The mad dash for newly listed Broadcom shares last week was quintessential IPO euphoria. Such initial offerings are few and far between, but they are enticing enough to accelerate the pace of money pouring into initial public offerings.
Including the nearly $1 billion of new float set for this week, the roughly $10 billion raised for IPOs this year is closing in on the record-setting pace set in 1996. But Broadcom's historic first-day pop may give investors pause before diving into this week's newcomers.
Investment firm Renaissance Capital, which runs the IPO+ Aftermarket Fund, sees Manhattan Associates as the deal of the week. The Atlanta-based provider of warehouse management systems offers IT, or information technology, services to manage distribution centers for major manufacturers and retailers, such as Seiko, Calvin Klein and The Sports Authority. The offering is expected to raise $33 million at a midpoint price of $11 per share.
The company has an excellent track record of growth, more than doubling its revenues and earnings to $32.4 million and $5.3 million, respectively, since 1993.
Riding the popular notion that focusing on core competencies is the most efficient way to run a business these days, Professional Detailing hopes pharmaceutical giants will see the benefits of outsourcing their sales and marketing efforts. The company goes public this week at a share price between $13 and $14 to raise $36.4 million.
Its 1000-person sales force markets the products of some of the biggest drug companies, such as Pfizer, Glaxo Wellcome and Johnson & Johnson - and to good effect. Revenues have grown at a compound annual rate of 87% over the last three years to $54 million in 1997.
Another firm capitalizing on the outsourcing trend is Charles River Associates with its prestigious stable of 120 consultants. It plans to offer shares at $16 this week to raise $35 million.
Founded more than 30 years ago, CRA provides expert advice to law firms and businesses on high-stakes matters, such as antitrust issues surrounding multi-billion dollar mergers. CRA's roster of clients includes such blue-chip law firms as Cravath, Swaine & Moore and Skadden, Arps, Slate, Meagher & Flom.
CRA attributes its success to the high cost of keeping well-paid experts on salary and an increasingly litigious business environment as markets become more competitive, traditional industries transform and new industries emerge.
Though CRA has a longstanding history of delivering quality work, rising revenues and profits, its challenge will be to broaden the depth of its consultants. Last year, one-third of CRA's nearly $45 million revenue was generated through the efforts of only five of the firm's consultants.
Finally, Salomon Smith Barney, which has built a reputation for leading some of the best- performing telecom IPOs, is behind yet another one: US LEC of Charlotte, N.C. This local exchange carrier, or C-LEC, is expected to price at $14 a share, raising $77 million. At that price, its market cap would stand at $369 million, or about 57 times last year's revenues. By almost any yardstick, say analysts, that is a very rich price indeed.
-- by Bambi Francisco for CNNfn Interactive
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