IPO Split-Offs Gain Popularity

January 16, 2014 Leave a comment

January 14, 2014, 12:31 AM ET

IPO Split-Offs Gain Popularity

VIPAL MONGA

Senior Editor

That’s the number of IPO split-offs companies did last year. A lukewarm environment for mergers and acquisitions encouraged companies to turn to the red-hot equity markets to shed units and raise capital.The number of initial public offering split-offs—those that raised capital—hit 14 last year, a post-financial-crisis high, according to audit and consulting firm PricewaterhouseCoopers LLP. That’s more than double the six completed in 2012 and the most since 2007, when 16 were done.

“Activity in M&A is good but not great, and the stock market is doing very well,” said Neil Dhar, head of the U.S. capital markets group at PwC. He said there was a lack of buyers willing to pay up for business units, particularly at the valuations implied by the stock market.

There were fewer acquisitions last year than since 2009, according to Dealogic. All told, companies announced 10,010 M&A deals in 2013, 18% fewer than the 12,226 deals announced the prior year.

For example, pharmaceutical giant Pfizer Inc.PFE -0.49% in February turned to the equity markets to sell part of its Zoetis Inc.ZTS -2.34% animal-health unit. That deal raised $2.2 billion and came after Pfizer rebuffed an offer for the unit by Novartis AGNOVN.VX -0.68%.

Mr. Dhar said that the recent wave of split-offs has been almost two years in the making, as companies often take a year or more to plan for such a separation.

And the trend may continue. Later this year General Electric Co.GE -0.86% intends to offer 20% of its retail finance business to the public, with plans to split off the rest of that business in 2015.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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