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Private Equity Firms Cashing In On IPOs

So far this year, PE-backed Initial Public Offerings (IPOs) are outperforming the overall IPO market so far this year. One of the best performers is Nielsen Holdings, an early, high-profile deal.

When personal finance company Bankrate went public a couple of weeks ago, its private equity owner was no doubt hoping recent history would be on its side.

So far this year, PE-backed Initial Public Offerings (IPOs) are outperforming the overall IPO market so far this year. According to IPO Investment Advisor Renaissance Capital market, so far this year there have been 76 IPOs raising $25 billion. The average IPO is up 6.8 percent from their IPO price but down 2.7 percent from their first day close. There have been 20 PE-backed IPOs raising $16 billion. Their average return was 10.5 percent from the IPO price and a positive 4.6 percent from the first day close.

One of the best performers is Nielsen Holdings, an early, high-profile deal. When it came public in January at $23, it was heralded as the largest private-equity-backed IPO in the US, raising $1.64 billion. The company — known for tracking television viewership — was bought in 2006 by Blackstone Group, Carlyle Group, KKR and Thomas H Lee Partners. The stock is now trading around $29.75, up about 29 percent from its IPO price.

The success of that deal in part spawned a few other mega-IPOs backed by private equity firms. For example, the following month Kinder Morgan sold 95.5 million shares at $30 a pop, raising $2.87 billion, enabling it to exceed the size of Nielsen’s offering. So far this deal has not been as successful as other PE-backed offerings, with the stock down about 5.5 percent. 

Kinder Morgan’s offering, however, was quickly topped by HCA, the largest U.S. for-profit hospital chain, which sold 126.2 million shares for $30 apiece, raising about $3.79 billion, in an offering that was larger than originally planned. The stock has since risen 10 percent to more than $33 a share. 

The selling shareholders included Goldman Sachs, which owned more than 25 percent of the company before the IPO, Highstar Capital LP, Carlyle Group and a partnership between Carlyle and Riverstone Holdings LLC. 

On the other hand, the stocks are down slightly for another large PE-backed company to go public this year—Freescale Semiconductor. 

Bankrate, a consumer banking and personal finance information company, was acquired and taken private by Apax Partners for $571 million in 2009. 

On June 16, Bankrate sold 20 million share for $15 per share. Apax sold 7 million of the shares, pocketing $100 million. The stock closed at $15.60 on Monday, higher than its first-day close. 

Despite selling shares, Apax still has a strong interest in this deal doing well, given it owned 70 percent of the company after the IPO was completed.

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