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Kraft's debut: $8.4B IPO
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June 9, 2001: 7:00 a.m. ET
Blockbuster week ahead for IPOs: Kraft, Willis expected to rise
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - The year's most anticipated offering, Kraft Foods Inc., will easily emerge as the blockbuster this week but a slate of four other offerings will provide a strong supporting cast, analysts said.
It's official. The IPO market has fought its way back with the help of a rebounding broadmarket, analysts said. After this week's handful of deals, which includes Kraft's huge IPO, another seven new issues are waiting to come next week.
"We've got an IPO market," John Fitzgibbon, editor of Gaskins IPO Desktop.
This week promises to be the strongest showing for IPOs in a very long time. The handful of deals is expected to raise the most--$8.8 billion—so far this year and is the best week, in terms of money raised, since April 26, 2000 when AT&T Wireless went public.
The huge $10.6 billion offering from AT&T Wireless helped a total of six IPOs in April 2000 raise $11.4 billion, according to CommScan, a New York-based investment banking research firm.
This week's calendar of offerings follows a strong performance last week when four companies raised $485 million, CommScan said. Unlike the IPO heyday of 2000, this week's crop is notable for their strong fundamentals.
"They're all solid companies," Fitzgibbon said. "Several have revenues in excess of $1 billion and all are profitable."
Five IPOs will begin trading, according to MCM CorporateWatch, and all will make their market debut on the New York Stock Exchange rather than the trendier Nasdaq Composite, which is known for its high-tech deals.
"This week's IPO calendar is quality all the way," Fitzgibbon said.
The Big Cheese
Philip Morris Cos. Inc., the world's largest tobacco firm, will formally give birth to the huge Kraft Foods offering which could raise as much as $8.4 billion. The Kraft IPO is the year's biggest new issue since last year's $10.6 billion offering from AT&T Wireless (AWE: down $0.06 to $16.55, Research, Estimates) and the second largest U.S. based IPO.
Northfield, Ill.-based Kraft, whose products include Oscar Mayer hot dogs and Jell-O gelatin, is the largest branded food and beverage company in the United States. The company had operating income of $1.1 billion on $8.4 billion revenue for the quarter ended March 31.
"Kraft is unbelievable," said Ben Holmes, president of IPOpros.com. "There isn't a single company that has managed to assemble a portfolio of brand names like Kraft."
The huge offering will likely not produce a huge premium when it begins trading on the Big Board, analysts said. A five percent premium would be a strong showing for the Kraft IPO that will trade more like a blue chip, said Corey Ostman, co-CEO of Alert-IPO.com.
Kraft will also likely not mimic the fate of AT&T Wireless whose shares have plummeted nearly 45 percent from their 52-week high of $29.56, analysts said. "Kraft is recession proof," Holmes said. "When the market turned down, food became very popular."
After the IPO, Philip Morris (MO: down $0.24 to $48.28, Research, Estimates) will own 49.5 percent of Kraft's common stock and 97.7 percent of voting power. Last week, a Los Angeles jury ordered Philip Morris to pay $3 billion to a 56-year-old man with cancer. The ruling followed an earlier verdict against Philip and other tobacco companies where they were also fined $17.8 million.
However, tobacco litigation is not expected to affect the Kraft IPO. "The lawsuits are out in the open," Fitzgibbon said. "This didn't just happen yesterday."
Kraft plans to offer 280 million shares at $27-to-$30 each via lead underwriters Credit Suisse First Boston and Salomon Smith Barney. Kraft is expected to price Tuesday and trade Wednesday under the NYSE symbol "KFT."
The other stars
While Kraft will receive all the buzz, the other four new issues are all solid plays, analysts said.
FMC Technologies Inc., a spin-off of FMC Corp., provides services and technology for the exploration and production of crude oil and natural gas. FMC Tech specialty division, foodtech, provides food handling and processing services. The foodtech unit handles 75 percent of the global production of orange juice and freezes about 50 percent of commercially frozen foods worldwide, the company said in a Securities and Exchange Commission filing.
FMC Tech had $8.3 million losses on $429.4 million revenue for the quarter ended March 31. "They have monster revenues but are losing money," said IPOpros.com's Holmes, who expects the IPO to flat or up to a $1 premium.
After the IPO, parent firm FMC Corp. (FMC: up $0.14 to $76.69, Research, Estimates) will own about 83 percent of outstanding shares.
Chicago-based FMC Tech plans to offer 11.05 million shares at $19 to $21 each via Merrill Lynch. The company is expected to price Wednesday and trade Thursday under the NYSE symbol "FTI."
General Maritime transports crude oil by sea within the Atlantic basin. The company is creating a 29-vessel fleet that will travel to ports in the Caribbean, the United States, Western Africa and the North Sea.
Customers include most major oil companies such as Chevron Corp. (CHV: up $0.43 to $96.44, Research, Estimates) , Exxon Mobile Corp. (XOM: up $0.21 to $89.39, Research, Estimates) and Texaco Inc. (TX: up $0.46 to $72.25, Research, Estimates).
General Maritime had $21.8 million income on $48 million revenue for the quarter ended March 31. Fitzgibbon, of Gaskin's IPO Desktop, gave the offering a three star rating and expects a $1 premium.
New York-based General Maritime plans to offer 7 million shares at $17 to $19 each via lead underwriter Lehman Brothers and ING Barings. The company is expect to price Monday for trade Tuesday on the Big Board under the symbol "GMR."
Insurance
Insurance-related IPOs don't come to market often and when they do, don't produce huge pops. For example John Hancock and Metlife didn't rage on their first day but have become strong long-term holdings.
The same is expected from the two insurance-related offerings this week, analysts said.
Willis Group Holdings Ltd., which claims to be the third largest insurance broker in the world, is the more compelling, analysts said. The 173-year old Willis provides risk-management consulting, employee benefits and insurance to about 50,000 clients globally.
Willis had over $1.3 billion revenue last year.
After the IPO, buyout firm Kohlberg Kravitz Roberts will own 63.9 percent while insurance firms AXA, Chubb Corp. and Travelers Property Casualty Corp., a unit of Citigroup (C: down $0.48 to $50.95, Research, Estimates), will each own 2.8 percent.
London-based Willis Group plans to offer 20 million shares at $10 to $12 each via lead underwriter Salomon Smith Barney. Willis plans to price Monday and trade Tuesday under the NYSE ticker "WSH."
Lastly, Odyssey Re Holding Corp. is a reinsurer that offers property and casualty products globally. Odyssey earned $221.4 million revenue on $18.8 million income for the March quarter.
Odyssey Re will offer 17.1 million shares at $16 to $19 each via Banc of America Securities and CIBC World Markets. The reinsurer plans to price Wednesday and trade Thursday under the NYSE symbol "ORH."
"Willis is a big insurance brokerage and very profitable," Holmes of IPOpros.com. The Willis offering could rise by 20 to 30 percent while Odyssey could trade up by 20 percent, he said. 
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