ING not a bellwether for asset manager IPOs

Money manager IPO activity should be strong this year, despite the pricing of the May 2 ING U.S. initial public offering below its initial range.

That deal “is a very different beast,” said Edward Higham, managing director at Silver Lane Advisors LLC, New York. “They have annuities, insurance, retirement services. Embedded in the business are very complicated annuities that presented all sorts of issues.”

“The market looks at ( ING) more as an insurer than as a money manager,” agreed Domonkos L. Koltai, partner and co-founder of PL Advisors, New York.

“I don't think it's indicative of IPO markets for money managers,” said Chris Browne, New York-based managing director at Sandler O'Neill & Partners LP. “The asset management portion (of ING U.S.) was too small a part of the overall business.”

What makes it different from other money manager IPOs — including the March 7 offering of Artisan Partners (APAM) Asset Management LLC — is that ING U.S. is “not a pure-play asset manager,” added Elizabeth B. Nesvold, New York-based founder and managing partner at Silver Lane. “It's a parent trying to pay off its tabs to the government.”

The ING U.S. offering, which raised $1.3 billion, was part of parent ING Group NV's agreement with the Dutch government to shed investment management, insurance and other assets to help pay back the e10 billion ($13.18 billion) bailout it received in 2008.

ING U.S. comprises the U.S.-based retirement, investment and insurance business of the Amsterdam-based parent. To be renamed Voya Financial by 2014, ING U.S. was priced at $19.50 a share; since trading began, the stock has traded in the $20.75 to $21.50 range and closed May 14 at $23.19. The IPO price was “more in line with ING's insurance elements,” Mr. Browne said.

PL Advisors' Mr. Koltai said the current bull market is an attractive one for IPOs. “In a typical bull market, publicly traded asset management companies are trading at a premium to (merger and acquisition) multiples, and today is no exception,” he said. “The average publicly traded asset manager is trading about 10 times” enterprise value to EBITDA, or earnings before interest, taxes, depreciation and amortization. That, he said, is “toward the high end of M&A multiples. If a seller of an asset management business is focused purely on maximizing valuation, then the IPO would be the better option, especially if it is a good business.”

Silver Lane's Ms. Nesvold agreed the market for money manager IPOs is favorable. “The overall window is open more than it was a year ago,” she said.

Mr. Koltai pointed to Nuveen Investments as a candidate for an IPO once its approximately $4.5 billion debt load from private equity firm Madison Dearborn Partners' 2007 leveraged buyout is reduced. “Nuveen has to bring their debt down to a level that public investors will accept,” he said. “When they do, a relisting would be a logical choice to provide MDP an exit.”

Ms. Nesvold repeated her belief from earlier this year that a likely candidate for an IPO in the near future would be Old Mutual Asset Management, the U.S.-based asset management business of Old Mutual PLC, London, which has backed off on plans to issue such an offering. Mr. Higham added that Old Mutual, which sold its U.S. life insurance business to Harbinger Capital Partners LLC in 2011, “is more of an asset management pure play than ING “

Rodney O. Martin Jr., chairman and CEO of ING U.S., said on the first day of the offering that he was encouraged by the response to the firm's IPO, with investors showing “a strong commitment to our story.”

“The pricing of a transaction of this size is more art than science,” Mr. Martin said.

Mr. Browne said a more relevant IPO was that of Artisan Partners whose stock was priced at $30, above the expected range of $27 to $29. The firm raised $332 million from the IPO; its stock closed May 10 at $43.35.

Bob Batchelor, spokesman for Milwaukee-based Artisan, said that when Artisan issued the IPO, “we weren't looking for a grand event. It was part of bigger and better long-term goals.”