The global market for initial public offerings rebounded decisively in the third quarter, on the strength of large deals in Asia and a U.S. market that emerged from its doldrums.
Renewed confidence and strong stock markets led to more and larger IPOs, including the year's largest, by China State Construction Engineering Corp, which raised $7.3 billion in July.
With 28 offerings worth $8.2 billion, Asian IPO activity nearly tripled over the preceding quarter, after seven straight quarters of decline, according to Thomson Reuters data.
In the United States, 11 deals had priced in the third quarter through Wednesday, yielding $3.6 billion. That included the largest IPO in 18 months, by Starwood Property Trust Inc, which raised $951.5 million in August.
This past week was the busiest in nearly two years in the United States, with seven IPOs expected to have made their debut by Friday.
"We view the third quarter of 2009 as a major inflection point in the IPO market," said Lisa Carnoy, global head of equity capital markets at Bank of America Merrill Lynch.
"The combination of more deals, bigger deals and broader range of sectors speaks volumes about what we will see next quarter and into 2010," she said.
Follow-ons were also robust. Globally, secondary offerings totaled $143.3 billion, one-third more than a year ago, the Thomson Reuters data shows.
Volume will probably remain above historical averages for some time, bankers said.
"It's likely many will take advantage of the buoyant equity market to pay down debt or put more cash away to grow organically or acquire other companies," said Mark Hantho, global head of equity capital markets at Deutsche Bank.
The combined value of all equity offerings in the pipeline stands at $194.5 billion, 60 percent of it from follow-ons.
IPOs in the global pipeline are expected to raise $69.7 billion, according to the Thomson Reuters data, buoyed by a surge of U.S. activity this summer, when 33 companies filed paperwork for prospective IPOs, versus four in the first half of the year.
"There has been enormous liquidity because money that was on the sidelines is now being redeployed into equities," said Carnoy.
PRIVATE EQUITY FIRMS UNLOAD
Encouraged by a thaw in the IPO market in the second quarter, private equity firms, eager to unload portfolio companies, launched several major deals this summer.
Avago Technologies Ltd, backed in part by private equity firm Kohlberg Kravis & Roberts & Co, raised $745.2 million in its IPO, while health record manager Emdeon Inc, backed by General Atlantic Partners and Hellman & Friedman, got $422.5 million.
More are on the way. Talecris Biotherapeutics Holdings Corp, controlled by private equity firm Cerberus Capital Management LP [CBS.UL], is expected to price its $849.3 million IPO on Wednesday, the last day of the quarter.
With the vast majority of 2009's crop of U.S. IPOs still trading above their offer price, private equity firms are likely to continue sponsoring IPOs for the next few quarters.
KKR's Dollar General Corp filed in August to raise up to $750 million and could come to market by year end.
BIG DEALS TO CONTINUE
The quarter's momentum looks set to carry into the last three months of the year. Banco Santander SA, the Brazilian unit of Spanish bank Santander, plans an IPO worth as much as $8.6 billion that is set to list on the New York Stock Exchange and the Sao Paulo stock market next month.
Insurance risk specialist Verisk Analytics is set to launch a $1.7 billion IPO the same day.
Other large new IPOs in the pipeline that filed this summer and could come to market by year-end include a prospective $1.15 billion offering by hotel chain Hyatt Hotels and a $500 million planned deal by fruit products company Dole Food Co.
The summer also saw a broadening of the industries represented in the IPO market, including the first recent flotation by a pharmaceuticals company, Cumberland Pharmaceuticals Inc, and the first by an e-commerce company, Vitacost.com, since November 2007 in what could be a sign investors are becoming more adventurous.
"People are moving down the risk spectrum," said John Chirico, co-head of capital markets origination for the Americas at Citigroup Global Markets.
Those deals and the success of lithium-ion battery maker A123 Systems Inc's IPO this week could whet investor appetite for deals in riskier industries.
But that doesn't mean the markets are frothy.
"I don't think the market is a euphoric state but is performing very nicely and we do expect that to continue," Deutsche Bank's Hantho said.