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October 15, 2010 6:26 PM

Could Social Media Be the Salvation for IPOs?

Posted by Brian Baxter

The forecast for initial public offerings may be uncertain, but some Am Law 100 capital markets partners are looking for reasons to be optimistic.

"The IPO market has a heartbeat, but it's not racing," says Mark Stevens, cochair of the private equity group at Fenwick & West in Silicon Valley. "And while that's an improvement from a few years ago, it's not that much. But there are growth opportunities out there."

Stevens believes that social media and entertainment IPOs could be the next big thing for corporate securities lawyers. Hulu, the online hub for television and movies, is reportedly planning an IPO for later this year that could value the company at $2 billion. An offering of that size could get the attention of a relatively somnolent U.S. IPO market waiting for the next big wave of public filings.

"There's an overall trend in favor of online media, which dipped during the downturn in its growth rate, but not in absolute dollars," Stevens says. "Now it's coming roaring back, especially online video and social media. There's a confluence of a number of trends that indicate growth in audience and revenues, which is a good combination for the public market that's looking for the next generation of growth companies."

Stevens says that an added bonus for social media and online entertainment IPOs is the fact that there aren't many companies in the field that are already public. Still, he adds, the category presents complications for new investors.

"Hulu is a business cobbled together based on the rights they got from their partner companies--there's no stand-alone business like with YouTube," Stevens says. "It's all created around the content, so these kind of consortium deals are a little more complicated because they need a stand-alone business to go public, but they exist for the pleasure of their founding partners. So how do you harmonize between the public shareholders of Hulu and the partner shareholders?"

For Stevens, the success of such an IPO lies in being able to strike a balance between those two interests. "Anything complicated is good for lawyers," he adds, but "it'll be interesting to see whether the people that own the content at NBC Universal might want to get a better rate from YouTube. That's not going to be very attractive for Hulu."

While Stevens declined to comment on possible upcoming IPOs for two noteworthy Fenwick clients--Facebook and Twitter--social media companies aren't the only ones booming.

According to a recent report by PricewaterhouseCoopers, non-U.S. issuers continued to invigorate the IPO pipeline in the third quarter of 2010. Several large listings worth noting, especially in the international realm, loom on the horizon.

In what could be one of the largest European IPOs of 2010, Italian energy giant Enel will seek to raise $4 billion in a public offering for its green power unit, Reuters reports. Some other larger IPOs in the works include a planned $654 million offering by Singapore's Mapletree Industrial Trust, an $850 million IPO for a unit of Norwegian oil giant Statoil, and a $433 million listing in London for a subsidiary of British infrastructure group John Laing.

Am Law 100 firms are clearly bracing themselves for more IPO work. Milbank, Tweed, Hadley & McCloy recently recruited capital markets partner Dieter Yih from Australian firm Mallesons Stephen Jaques in Hong Kong as part of an effort to launch a local law practice.

Yih, a vice president of the Law Society of Hong Kong who operated his own firm called Kwok & Yih for ten years before merging it with Mallesons in 2004, has advised on numerous Hong Kong and Chinese IPOs. Hong Kong IPOs in particular are booming right now, according to Asia Legal Business; Reuters reports that the region's IPOs demonstrate the region's growing economic prowess.

Some other recent IPO legal news of note:

CAMPUS CREST COMMUNITIES

The Charlotte-based student housing developer raised $354.2 million in its IPO this week after pricing at the bottom of its range, according to The Associated Press. Corporate partners Paul Ware and J. Andrew Robison from Alabama firm Bradley Arant Boult Cummings advised Campus Crest on the IPO. Also advising the real estate investment trust was Jonathan Golden, a name partner at Atlanta firm Arnall Golden Gregory, and Saul Ewing on Maryland law.

According to an SEC filing, Campus Crest lists legal fees in connection with its IPO at $2.2 million. Sidley Austin corporate partners J. Gerard Cummins and Bartholomew Sheehan III represented underwriters led by Citigroup, Goldman Sachs, and Raymond James.

HICKS ACQUISITION II

In a week when Tom Hicks saw his British soccer team snatched away from him, the Dallas businessman launched a $150 million IPO for his special purpose acquisition company, The Wall Street Journal reports. It's a far cry from the $400 million Hicks sought to raise for his first acquisition vehicle four years ago.

Akin Gump Strauss Hauer & Feld corporate partner Bruce Mendelsohn and investment funds partner James Deeken are advising Hicks Acquisition on the offering. According to an SEC filing, Hicks Acquisition lists legal fees in connection with its IPO at $500,000. Bingham McCutchen corporate partners Ann Chamberlain and Floyd Wittlin are representing underwriters led by Citigroup and Deutsche Bank Securities.

NETSPEND HOLDINGS

The prepaid debit card provider refiled its IPO seeking to raise $200 million on Friday, according to The AP. NetSpend's listing had been delayed because of a regulatory problem involving one of its loan programs. Baker Botts corporate partners Michael Bengston and William Howell are advising the Austin-based company on its IPO.

According to an SEC filing, NetSpend lists legal fees related to the IPO at $1 million. The filing shows that Christopher Brown, a former Baker Botts partner serving as general counsel for NetSpend, was paid $591,134 in 2009. Sullivan & Cromwell corporate finance cohead Robert Buckholz, Jr., is representing underwriters led by Bank of America/Merrill Lynch, Goldman Sachs, and William Blair.

EOLA PROPERTY TRUST

The Orlando-based real estate investment trust announced last week that it plans to raise $675 million in an IPO and to use the proceeds to repay debt and acquire new properties, Reuters reports. J. Warren Gorrell, Jr., co-CEO of Hogan Lovells, is advising Eola on its planned IPO along with capital markets cochair David Bonser and corporate securities partner Eve Howard. (Another firm not involved in the Eola offering, Morrison & Foerster, recently put out its own guide to REIT IPO's, the landscape for which the firm believes has changed in recent years.)

Sidley capital markets cohead Edward Petrosky and Cummins are advising underwriters led by BofA/Merrill Lynch, Barclays Capital, and Wells Fargo Securities. According to an SEC filing, legal costs related to the offering are not yet available.

TOWER INTERNATIONAL

Shares of auto parts supplier Tower International began trading publicly on Friday after private equity owner Cerberus Capital Management began an IPO seeking to raise $106 million, Bloomberg reports. Lowenstein Sandler corporate chair Peter Ehrenberg and counsel Michael Reinhardt are advising Livonia, Mich.-based Tower on the offering.

According to an SEC filing, Tower lists legal fees related to its IPO at $4 million. Davis Polk & Wardwell corporate partner Joseph Hall is representing underwriters led by Citigroup, Goldman Sachs, and JPMorgan.

U.S. FEDERAL PROPERTIES TRUST

The Kansas City, Mo.-based REIT, which focuses on acquiring federal government-leased properties,filed late last month for an IPO seeking to raise $268 million. But USFP subsequently announced earlier this month that it had delayed pricing for the offering, Reuters reports.

Robert Kaplan and Robert Kaplan, Jr., of Richmond firm Gregory Kaplan are advising USFP on the IPO. Hunton & Williams is providing tax and REIT counsel to USFP, while Venable is advising on Maryland law.

According to an SEC filing, USFP lists legal fees related to its IPO at $480,000. Sidley partners Cummins and Petrosky are representing underwriters led by Deutsche Bank Securities and UBS Investment Bank.

QR NATIONAL

The largest rail freight company in Australia is set for a public listing that will raise nearly $5 billion in the largest IPO the Land Down Under has seen in almost a decade, according to The Wall Street Journal. A trio of Aussie firms landed roles on the offering by Brisbane-based QR National, which operates as an arm of the Queensland government and is the world's largest rail transporter of coal.

QR National's seven external advisers--including Allens Arthur Robinson and Minter Ellison--will share almost $34 million in fees from the IPO. AAR will get nearly $1 million for its efforts, while Minter will get roughly $745,000, according to Aussie publication The New Lawyer. (AAR corporate partners Erin Feros and John Greig and Minter corporate partners Bruce Cowley and Khory McCormick led the teams from both firms.)

Clayton Utz corporate partners Stuart Byrne and Tim Reid are advising underwriters led by Credit Suisse, Goldman Sachs, BoA/Merrill Lynch, the Royal Bank of Scotland, and UBS.

AZ ELECTRONIC MATERIALS GROUP

Despite a slowdown in private equity-backed IPOs in the third quarter, a Luxembourg-based chemicals maker owned by private equity giant The Carlyle Group has unveiled plans for a $700 million IPO in London, Bloomberg reports.

AZ Electronic Materials Group makes the chemicals necessary for semiconductors and flat-panel displays. Clifford Chance capital markets partners Adrian Cartwright, Iain Hunter, and Christopher Walton are advising the company along with banking and finance partners James Butters, John Dawson, and Christian Kremer.

Clifford Chance has a longtime relationship with Carlyle, having handled its first investment in Greece in 2008, as well as many other European transactions for the PE firm. David Walker, Clifford Chance's global head of private equity, handles most deals for Carlyle and is working on the AZ offering. (Mark Spinner, the head of private equity at British firm Eversheds, is also advising AZ.)

Freshfields Bruckhaus Deringer corporate partners Jennifer Bethlehem and Simon Witty are representing underwriters led by Deutsche Bank, Goldman Sachs, and UBS Investment Bank.

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