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UPS set for record IPO
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November 5, 1999: 7:36 p.m. ET
Nov. 10 IPO expects to raise $5.1B to $5.4B, almost doubling value of stock
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - United Parcel Service upped the price range of its initial public offering late Friday, putting it on course for the largest IPO in U.S. history next week and almost doubling the value of current shareholders' stake in the company.
The Atlanta parcel delivery giant put the new range at $47 to $49 a share, up from the $36 to $42 a share it set three weeks ago. Since it is planning to sell 109.4 million shares next Wednesday, the IPO is set to raise between $5.1 billion and $5.4 billion before expenses.
The
largest IPO in U.S. history was the $4.4 billion raised for DuPont Co.'s Oct. 21, 1998, sale of 30 percent of its stake in Conoco Inc., the Houston oil company, although there were several larger stock sales when various national companies in Europe were privatized.
The UPS stake being put up for sale represents only 10 percent of the company. The shares are currently held by employees, retirees and trusts established by the company's early founders.
The current price of shares, set by the company's board of directors, is the equivalent of 25-1/2 for each of the new shares of the company. The company said one of the reasons for the IPO is to give the 125,000 current shareholders a market for their shares.
UPS is the world's largest transportation company, and despite being unionized, is one of the most profitable. In the most recent quarter, it had net income of $577 million from operations, on revenue of $6.7 billion. It had $2 billion in cash or cash equivalents on hand at the end of the last period.
Transportation analysts and IPO experts have said that interest in the offering is especially keen. Not only does the company offer investors strong profit statement and a gold-plated balance sheet, it is also a major player in the delivery of goods being purchased on the Internet by consumers. A study a year ago by Zona Research said that 70 percent of online purchases by consumers were being delivered by UPS.
"The solidity makes for a good investment. The e-commerce part makes for the strong interest," said Ullas Naik, senior vice president, research, at FAC Equities.
The company intends to use the proceeds of the IPO to repurchase shares from existing shareholders. The company said it wanted to have the stock to use it as a currency for future acquisitions, even though it had the cash reserves and credit line necessary to buy virtually any company in the world.
"From UPS' standpoint, it would be good collateral to use to buy technology companies," Naik said. "The valuation for technology companies are very high. Why would you pay cash for that, why not pay with another inflated stock?"
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United Parcel Service
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