Affinion Group Postpones $490 Million Initial Public Offering

By Tim Mullaney

Oct. 10 (Bloomberg) -- Affinion Group Holdings Inc., the marketing services company whose clients include Bank of America Corp. and JPMorgan Chase & Co., postponed a $490 million initial public stock offering.

Morgan Stanley and Deutsche Bank Securities, the sale's managers, had planned late yesterday to sell shares at a price of $15 to $17 each, according to regulatory filings. Affinion spokesman Todd Smith confirmed the postponement, without giving a reason.

Analyst Francis Gaskins said Affinion's business is barely growing and unprofitable, and that the 28 percent jump in sales in the first half was mostly a result of an accounting change.

``It's almost a misrepresentation,'' said Gaskins, president of IPODesktop.com in Marina del Rey, California. ``The financial trends are down. Their operating profit is negative. What else do you need to know?''

Proceeds from the sale were to be used to reduce Norwalk, Connecticut-based Affinion's $1.7 billion debt, according to the filings. The company runs loyalty programs for client companies and offers services to let consumers monitor their credit reports.

``Right now, we're day to day,'' Affinion's Smith said. Morgan Stanley spokeswoman Mary Claire Delaney declined to comment on whether underwriters would try to reschedule the IPO.

While Affinion posted a 2006 net loss of $452.6 million on sales of $1.14 billion, it generates positive operating cash flow, according to regulatory filings. It had $264 million in profit before interest and non-cash expenses last year.

Chief Executive Officer Nathaniel Lipman, in promoting the offering to investors, forecast an annual dividend of 64 cents a share, according to a Sept. 24 presentation.

Expensive

The $60 million estimated cost of the dividend would consume three-fourths of 2006's free cash flow, said analyst Sam Snyder at Renaissance Capital in Greenwich, Connecticut, which follows the IPO market.

Renaissance considers Affinion's shares expensive. ``On valuation, everything but the dividend yield doesn't look too good.''

Lipman wasn't available for an interview, Smith said, citing federal rules governing public statements by companies attempting securities sales.

Investor Leon Black's Apollo Funds group owns 97 percent of Affinion. It bought control from Cendant Corp. in 2005 for $1.8 billion. The IPO would have valued the company's equity at about $1.46 billion, with about $1.2 billion in remaining debt.