Lincolnshire, Ill. - Consultant and defined contribution service provider Hewitt Associates LLC is moving forward with its initial public offering.
The company filed a registration statement March 12 with the Securities and Exchange Commission as the first formal step in the initial public offering process. The proposed maximum aggregate offering price will be $250 million, according to the filing, which states that proceeds from the IPO will be used to pay off $78 million in tax obligations and $68 million in debt. Hewitt also plans to use publicly traded equities for acquisition and partnership purposes, according to the SEC filing. Goldman Sachs & Co. is underwriting the IPO.
Clients are not concerned about the news.
"At the moment, (the IPO) is not an issue," said Tom Foster, director of investment regulatory finance and analysis for MidAmerican Energy Co., Des Moines, Iowa. Hewitt is consultant to the company's $550 million pension plan and $450 million 401(k) plan. Mr. Foster said MidAmerican, which was informed of the planned IPO by e-mail in March, is not concerned about the move.
"Oftentimes, these situations are exit vehicles (for upper-level management)," said Mr. Foster.
"I don't have any concerns (about the IPO)," said William Searcy, pensions and savings trust officer at Sprint Corp., Westwood, Kan. The telecommunications company has retained Hewitt as consultant to the $3 billion defined benefit and $2.5 billion 401(k) plans since January 1997.
Some questions
However, not everyone has bought into Hewitt's announced motives. Michael Flynn, president of privately held consulting Stratford Advisory Group, Chicago, questioned what the future of Hewitt's consulting business will be. He said contacts at Hewitt have told him the consulting business is a "profit loss center."
Jennifer Rice, a Hewitt spokeswoman, said the company was forbidden from talking to the press while under review by the SEC.
While Gautam Dhingra left the firm in January as head of the consulting practice in the Lincolnshire office; Mark Klimek, who was head of the defined contribution practice, was named to replace him. And the company is going ahead with its acquisition of U.K. consultant Bacon & Woodrow. It also will add L16 million ($23 million) to Hewitt's debt total. The acquisition, which was announced in October 2000, is expected to be completed in May, according to the Hewitt filing.
"I think that they have to deal with potential conflicts of interests," said Robert DiMeo, managing director of Chicago-based consulting firm DiMeo Schneider & Associates LLC. An example would be a money manager that owned a large block of Hewitt stock could be seen as exercising influence over the firm. Mr. Flynn agreed, although both said a publicly traded Hewitt would not necessarily be at risk of compromising itself.
Hewitt Associates made $1.5 billion in revenue in the year ended Sept. 30, according to Form S-1.
