IPO REPORT -- CBS.MarketWatch.com
Kinetic Concepts IPO moves higher
Medical equipment maker prices above estimated range
 
By Steve Gelsi, CBS.MarketWatch.com
Last Update: 4:18 PM ET Feb. 24, 2004
 
NEW YORK (CBS.MW) -- Kinetic Concepts' initial public
offering closed nearly 35 percent higher Tuesday as the
medical products maker wowed Wall Street with its
healthy bottom line.
 
Shares (KCI: news, chart, profile) opened at $33 per share,
well above the IPO's $30 price.

The stock picked up strength in the open market and
closed at $40.40 for the biggest opening day gain of
any IPO on the NYSE thus far in 2004, according to
Thomson Financial.

The company's pedigree has been strong enough to
shake off overall market uncertainty on Tuesday, as
stocks wrapped up their fifth straight losing session.
See full story.

Elsewhere in the IPO market, Tom Online set its
estimated range as the Chinese Internet firm readied
its stock market debut for March. See full story.

Analyst Francis Gaskins of IPOdesktop.com said
Kinetic Concepts' 10 percent after-tax earnings growth
and market share caught his interest.

Kinetic Concepts was "unshackled" by a 2002
antitrust win against rival Hillenbrand (HB: news,
chart, profile) and has been unfurling a strong
number of patents on equipment, he said.

The company also benefits from a high percentage
of equipment rental fee income, which is boosting
its bottom line.

Kinetic's price is right

Signs of a healthy debut came as Kinetic Concepts
priced above its $27 to $29 range and boosted the
size of the deal by 4 million shares to 18 million for
healthy proceeds of $540 million with underwriters
Merrill Lynch and J.P. Morgan Chase.

Kinetic Concepts earlier this month posted fourth-quarter
net income of $68 million on revenue of $216 million,
up from net income of $121 million and revenue of $165 million.

Fourth-quarter net income rose 45 percent to $21.2 million,
excluding recapitalization expenses and the proceeds
from an antitrust settlement.

The company, founded in 1976 by emergency room
physician Jim Leininger, makes devices that use
vacuum suction to help close wounds. It also makes
therapeutic surfaces, including a rotating bed aimed
at easing complications associated with immobility
and obesity, such as pressure sores and pneumonia.

The company's share of the IPO is only 3.5 million
shares, with insiders such as Fremont Partners,
Blum Capital and founder and chairman Leininger
selling a combined 14.5 million shares.

The IPO also contains bonuses of about $19 million
for Kinetic Concepts executives, including a bonus
of up to $13 million for CEO Dennert Ware.

IPOdesktop.com's Gaskins said the bonus was
laid out in a 2000 compensation agreement if
execs met certain milestones for the company.

"While insider selling and a large management
bonus on the offering are turn-offs, Kinetic Concepts
is run by experienced executives who have achieved
impressive top line growth to date," Renaissance
Capital said in its IPO of the week column. "In addition,
group momentum among its medical device peers has
picked up in recent weeks and the valuation is reasonable."

Kinetic Concepts is in line to narrowly surpass the
30.3 percent gain by Government Properties Trust
(GPP: news, chart, profile) on Jan. 27. The biggest
IPO gainer of the year so far is Nasdaq-listed Eyetech
Pharmaceuticals (EYET: news, chart, profile), which
gained 54.3 percent on its first day of trades on Jan. 30.

China chip firm SMIC sets IPO terms

China-based Semiconductor Manufacturing International,
or SMIC, plans to offer 86.4 million American depositary
shares at a price range of $15.50 to $17.50, according
to a filing on Monday. The Shanghai-based chip foundry
plans to raise about $1.4 billion in the IPO with lead
underwriter CS First Boston.

The IPO is expected to price on March 11 with trading
kicking off March 17 and on the Hong Kong Stock
Exchange the following day, according to a note from
Renaissance Capital.

The company plans to trade on the NYSE under the
ticker symbol "SMI." It's the second Chinese IPO to
move ahead this week along with Tom Online, an
Internet software firm that sells products and services
for wireless phones.

Steve Gelsi is a reporter for CBS.MarketWatch.com in New York.