Buffett's Berkshire Hathaway Inc. holds a sizable stake in Bellevue, Wash. life insurer Symetra Financial Corp., which hopes to raise about $351 million in its initial public offering.
Symetra, which sells life insurance, medical insurance underwriting services, and retirement products such as annuities and IRAs, is overshadowing the other five companies expected to debut Friday so much that it's "basically the only deal on the calendar this week," according to John Fitzgibbon of IPOScoop.com.
Symetra, originally slated to go public in November 2007 with a $750.5 million IPO, canceled the offering due to market turmoil just prior to the recession's start. At the time, major shareholders White Mountains Insurance Group Ltd., and Buffett's Berkshire Hathaway had both planned to sell their entire stakes.
This time, Berkshire Hathaway and White Mountains aren't selling any of their Symetra shares. Each own 26.3 percent of Symetra. Buffett's bet is a vote of confidence, reassuring investors, said Scott Sweet, an analyst with IPOBoutique, while a pared-down down price makes the shares more attractive. Symetra originally expected to sell shares for between $18 to $20 each; now they're expected to fetch between $12 to $14 apiece.
Other IPOs expected to start trading this week include a $125 million offering from tissue maker Cellu Tissue Holdings Inc., two real estate investment trusts and two Chinese companies.
There's a $300 million offering from Terreno Realty Corp., a newly organized company focused on industrial property in six U.S. cities, and a $150 million offering from Chesapeake Lodging Trust, an investment group formed to acquire upscale hotels.
Chesapeake was originally slated to start trading in early December with a $250 million IPO, but was among five companies that shelved offerings that month due to anemic market conditions at the end of the year.
Terreno was formed in November 2009 and has no operating history. In a regulatory filing, the company said it expects proceeds of about $280.3 million, which it will use to buy buildings such as warehouses and manufacturing facilities.
Two Chinese companies, Andatee China Marine Fuel Services Corp. and China Hydroelectric Corp., are planning initial offerings this week, each hoping to raise less than $100 million.
Alpharetta, Ga.-based Cellu's 7.8 million share-offering, expected to price between $15 to $17, is generating little interest, said Sweet, because of Cellu's heavy debt load and potential competition. Its products aren't hard for other companies, such as consumer products maker Kimberly-Clark Corp., to replicate, Sweet said.
Cellu supplies private-label tissue paper to low-cost chains such as Dollar General and Walmart, as well as other tissue manufacturers and industry suppliers.
"There are no barriers to entry by competition," said Sweet. Their tissue isn't patented, he said, and wouldn't require a big company such as Kimberly-Clark to invest in technology to make it and take Cellu's Walmart account, for example.
Cellu expects net proceeds of only $29.4 million. Nearly three-quarters of the shares are being sold by the company's shareholders, primarily its private-equity backers. The company will use funds it raises from the IPO to pay down debt. It carried $269.1 million in total debt at the end of November.
"Looks like this is a solid company," said Fitzgibbon. But investor interest is focused on Symetra, overshadowing the other IPOs, he said.