Carlyle’s SS&C Sells IPO at High End as Meru Adds to Rebound

Date: Wednesday, March 31, 2010
Author: Bloomberg

SS&C Technologies Holdings Inc. and Meru Networks Inc. sold shares in initial public offerings at the high end of their price ranges, as a recovery in the U.S. IPO market gained momentum.

Carlyle Group’s SS&C, which provides trading and investment management software to the financial industry, raised $161 million after pricing 10.7 million shares at $15 each, according to a filing with the Securities and Exchange Commission and Bloomberg data. Sunnyvale, California-based Meru, the maker of Wi-Fi networking equipment, sold $65.8 million of shares at $15 each. Both companies sought $13 to $15 each in their sales.

The initial sales came after a rally in U.S. stocks to an 18-month high spurred a revival in IPO demand. All seven American deals in the past two weeks were sold within or above the price ranges set by underwriters as the rebound in the Standard & Poor’s 500 Index from its low on Feb. 8 increased to 11 percent. The first 14 offerings of 2010 were chopped by 24 percent on average, according to data compiled by Bloomberg.

“The sentiment for IPOs has really improved,” said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC and manager of the Direxion Long/Short Global IPO Fund. “It’s worthwhile to consider these stocks if they price at the upper end of the range to buy them.”

MaxLinear, Calix

MaxLinear Inc., which designs semiconductors that let people watch television on their mobile devices, raised 28 percent more than the Carlsbad, California-based company originally sought in its initial sale last week. The same day, Calix Inc., which sells connection equipment to telephone companies, priced its offering at the high end of its forecast range. MaxLinear jumped 34 percent in its first day of trading, while Petaluma, California-based Calix gained 16 percent.

SS&C of Windsor, Connecticut, sells software that helps fund managers and brokerages trade stocks, bonds, currencies, futures and options, as well as financial modeling tools for municipal bonds and life insurance, according to its SEC filing.

The company sold a 16 percent stake and will receive 77 percent of the proceeds before fees and expenses, according to its filing. Carlyle, the Washington-based buyout firm that oversees $89 billion, didn’t plan to offer shares in the IPO and will retain a 63 percent stake.

Most of the net proceeds will be used to redeem as much as $71.75 million in outstanding debt due in 2013, on which SS&C pays 11.75 percent in annual interest. The company will keep the rest and may use the money to finance potential takeovers.

Relative Value

The offering gives SS&C a market capitalization of $1.04 billion when it starts trading today on the Nasdaq Stock Market under the ticker SSNC. That’s 55 times the company’s 2009 net income of $19 million, data compiled by Bloomberg show.

The valuation is more than three times the median 16.99 times that 98 computer-software suppliers command globally, data compiled by Bloomberg show.

SS&C was also valued at premiums of at least 14 percent to two of its competitors. Evesham, England-based Misys Plc, which provides a rival service to banks and credit unions, trades at 46 times earnings. Advent Software Inc. in San Francisco, SS&C’s competitor for portfolio-management software, is valued at 48 times income, data compiled by Bloomberg show.

JPMorgan Chase & Co. of New York arranged SS&C’s sale.

Meru, backed by Clearstone Venture Partners and New York- based hedge fund firm D.E. Shaw & Co., will use the proceeds from the IPO to expand sales and marketing, as well as research and development, its filing showed.

The company had $69.5 million in sales last year, a 27 percent increase from a year earlier. Bank of America Corp. of Charlotte, North Carolina, arranged Meru’s initial offering.

Canadian IPOs

Athabasca Oil Sands Corp. raised C$1.35 billion ($1.32 billion) yesterday, Canada’s biggest IPO since Toronto-based Manulife Financial Corp. sold C$2.48 billion in 1999.

The oil exploration company sold 75 million shares at C$18 each, according to a prospectus. Calgary-based Athabasca’s sale exceeded Sensata Technologies Holding NV’s $569 million offering this month, making it the largest deal of 2010 in North America.