Prudential files $3.9B IPO

April 9, 2001: 3:29 p.m. ET

Demutualized insurance firm files $3.9B IPO, 4th largest U.S.-based IPO

NEW YORK (CNNfn) - Prudential Financial Inc., the No. 2 U.S. life insurer, filed Monday with the Securities and Exchange Commission to raise $3.9 billion in an initial public offering.

At $3.9 billion, the Prudential IPO would be the largest U.S.-based IPO since AT&T Wireless's $10.6 billion offering last year. The Prudential float also dwarfs the $3.6 billion offering from Agere Systems Inc. which went public earlier this year. While highly anticipated, shares for Agere (AGR.A: up $0.13 to $5.18, Research, Estimates) are currently trading below their $6 price.

The Prudential offering is on track to go public in the fourth quarter, a spokesman said. Newark, N.J.-based Prudential Financial plans to sell 89 million shares via lead underwriters Goldman Sachs and Prudential Securities Inc.

The company had yet to set terms but estimated that shares would be sold at $30 each. However, the insurance firm is issuing 454.6 million shares to Prudential Financial policyholders of Prudential Insurance Co. of America as part of its demutualization. Underwriters also have an over-allotment option, or "green shoe," to buy 13.35 million shares.

Prudential Financial, the holding company, is the new name for the demutualized firm of Prudential Insurance Co. of America. All 89 million shares are being sold by Prudential Financial. Prudential is valued at about $16.31 billion with 543.6 million shares outstanding after the offering.

CNNfn.com first reported last November that Prudential's board would vote on a plan to convert to stock ownership and that an IPO was on track for late this year.

The 125-year old Prudential, which has long sold primarily life insurance but now also offers annuities, property and casualty insurance, and operates a real estate brokerage, is opting for a full demutualization. Prudential owns Wall Street firm Prudential Securities, which is serving as co-lead underwriter, but is not related to the U.K.-based Prudential PLC.

Prudential had $20.6 billion in equity and $272.8 billion assets as of Dec. 31. Revenues came to $26.5 billion, according to the SEC filing.

Prudential is the latest insurance company to demutualize and go public. Companies that demutualize convert from member to stock ownership and can choose a variety of options to do so. In the most popular, a full demutualization, the company unbundles policyholders' equity and ownership, giving them either cash, stock or policy credits.

Both MetLife Inc. and John Hancock Financial Services Inc. chose to fully demutualize last year and float IPOs.

The insurance sector produced some of the largest IPOs in 2000. MetLife floated a $2.8 billion issue last April and John Hancock Financial Services Inc. produced a $1.7 billion sale in January 2000. The large deals typically produce little pop on their first day but then surge. MetLife (MET: up $0.28 to $29.95, Research, Estimates) gained 3.5 percent in its first day but since has jumped 108 percent. John Hancock (JHF: down $0.52 to $36.35, Research, Estimates) rose 4.4 percent in its debut but has since more than doubled from its $17 offer price.

Prudential plans to trade under the New York Stock Exchange symbol "PRU."