Time Warner Picks Five Banks to Handle Cable IPO, People Say

2006-10-19 02:46 (New York)

By Dana Cimilluca

Oct. 19 (Bloomberg) -- Time Warner Inc. picked five banks,
including UBS AG, to manage the initial public offering of its
cable-television unit in what may rank among the largest stock
sales in history.

UBS, Deutsche Bank AG, Lehman Brothers Holdings Inc.,
Citigroup Inc. and Goldman Sachs Group Inc. will handle the sale,
said three people familiar with the assignments. They declined
to be named since New York-based Time Warner didn't disclose the
underwriters when it announced the planned IPO yesterday.

Time Warner Cable, the second-largest U.S. cable provider,
is worth more than $40 billion, estimate analysts at Morgan
Stanley. Based on that valuation, a public sale of 5 percent of
the company probably would generate underwriting fees of more
than $100 million.

`This is the giant of the year marching down main
street,'' said Francis Gaskins, president of Los Angeles-based
research company IPODesktop.com. ``It will be an instant blue
chip.''

Time Warner spokeswoman Susan Duffy declined to comment
beyond the company's filing, which didn't say how big the
offering may be. Officials at New York-based Lehman, Citigroup
and Goldman, as well as Deutsche Bank in Frankfurt and UBS in
Zurich, declined to comment.

U.S. IPO underwriters are charging an average fee of about
6 percent this year, data compiled by Bloomberg show. At that
rate, and with Time Warner Cable valued at $40 billion, a 5
percent sale would raise more than $2 billion and generate about
$120 million in fees.

IPO Market

Only 10 U.S. IPOs since the end of 2000 have raised more
than $2 billion, led by Kraft Foods Inc.'s $8.68 billion share
sale in 2001.

The IPO market is the healthiest in six years, Bloomberg
data show. U.S. companies have raised almost $34 billion in
stock sales so far in 2006, up 12 percent from the same period
last year. In 2000, the biggest year ever for initial stock
sales, $57.1 billion was raised in U.S. IPOs through Oct. 18.

Time Warner, the world's largest media company, will retain
an 84 percent stake in the cable unit. Time Warner Chief
Executive Officer Richard Parsons is taking the cable division
public to try to boost the company's share price. The IPO also
will allow the cable business to use its shares for acquisitions.

Proceeds from the sale will go to Adelphia Communications
Corp. creditors, who got 16 percent of the company when Adelphia
was bought by Time Warner and Comcast Corp., the nation's
largest cable provider, for $16.7 billion in July.

Shares of Time Warner, which also owns AOL, CNN, the Warner
Bros. movie studio and magazines including People, rose 21 cents
to $19.59 in New York Stock Exchange composite trading yesterday.
They've gained 12 percent this year, trailing the 48 percent
advance of Philadelphia-based Comcast. Valuations have been
buoyed by optimism that cable companies will continue to add
clients with packages of TV, Internet and phone service