NEW YORK (Reuters) – Private equity-backed LPL Investment Holdings, parent of one of the largest U.S. brokerage companies, filed on Friday for a long-awaited initial public stock offering worth up to $600 million.
LPL Financial, which is the fifth largest broker dealer by number of licensed financial advisers, supports more than 12,000 independent financial advisers at financial institutions across the United States by providing technology, trading and investment services. The company also provides clearing and technology for another 4,000 advisers.
Private-equity firms Hellman & Friedman LLC and TPG Capital acquired a 60 percent stake in LPL in a 2005 deal that valued the firm at about $2.5 billion, according to the original press release.
The two firms currently own more than 72 percent of LPL, according to the prospectus.
The filing left blank the number of shares that would be sold by the company and by selling stockholders but LPL said it would use proceeds from the offering to repay a portion of its debt.
LPL is the latest in a rush of private equity backed companies to file to go public amid a fragile market.
Nielsen Holdings BV on Thursday filed to raise up to $1.75 billion. Toys R Us, hospital operator HCA Inc and Dutch semiconductor company NXP Semiconductors, have also recently filed to go public. Coffee chain Dunkin’ Donuts is widely expected to file.
Even with the increase in filings by private equity portfolio companies, the U.S. market for IPOs has slowed, and many deals have been cut or shelved as investors concentrate on protecting their portfolios and wait to see if Europe’s debt crisis will stall economic recovery.
Bankers and analysts say private equity companies face increased scrutiny from investors who see them as too highly leveraged exit vehicles for buyout firms.
“I think the public market still views these private equity recap deals with some disdain,” said Chicago-based Harris Private Bank Chief Investment Officer Jack Ablin, who helps oversee $55 billion.
IPOdesktop.com President Francis Gaskins agreed.
“The deal can get done, but it will depend on pricing,” he said.
LPL, which has headquarters in Boston, Charlotte, and San Diego, said it has increased revenue by 15 percent a year on average since 2000. Between 2004 and 2008, LPL’s ranks of advisers grew by 20 percent a year.
LPL, once known as Linsco/Private Ledger, focuses on investors with between $100,000 and $1 million of investable assets. It intends to list its shares under the symbol “LPLA,” but did not say on which exchange.
As of March 31, LPL’s advisory and brokerage assets totaled $285 billion. LPL said it earned $25.6 million on $743 million of net revenue in the first quarter, or 25 cents a a share on pro forma basis.
“This gives LPL a currency to pay employees and maybe even to pay financial advisors, a way to tie key people to the firm longer. It also gives the firm a source of new funds if they determine that another acquisition is wise,” Tiburon Strategic Advisors Managing Principal Chip Roame wrote in an e-mail.
“More wirehouse brokers will respect the firm as a public company and that may boost LPL recruiting of larger teams,” he said. “This announcement is another threat to the dominance of the wirehouses.
The firm is headed by Chief Executive and Chairman Mark Casady. Casady joined LPL in 2002 after spending eight years at Deutsche Asset Management, Americas. He first served as LPL’s Chief Operating Officer, then became President in 2003 before taking on the role of CEO and Chairman in December 2005.
Casady holds about 3.91 million shares of LPL, or about 4 percent of the company.
LPL’s IPO will be managed by Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch and JPMorgan Chase & Co. (Reporting by Joseph A. Giannone and Clare Baldwin; editing by Andre Grenon, Bernard Orr)