PE-Backed IPO Pipeline: More On The Way

The great start to the IPO market this year should bode well for other firms looking to win the hearts of public equity investors. At least eight PE-backed companies have registered or are expected to file their plans to go public with the Securities and Exchange Commission so far this year.

None has the scale of either HCA Holdings Inc. (which floated this week to much acclaim) or Kinder Morgan, but two portfolio companies are expected to submit plans seeking to raise around $1 billion each. One of these is Allison Transmission Inc., which is backed by Carlyle Group and Onex Corp. The Indianapolis-based maker of automatic transmissions for school buses and other vehicles, which has hired Bank of America Merrill Lynch, Citi, Credit Suisse, Morgan Stanley and JPMorgan & Co. to serve as underwriters, is looking to go public in the third quarter.

The other portfolio that could seek $1 billion through an IPO is DLJ South American Partners LP’s Arcos Dorados SA, which owns and operates McDonald’s fast food chain restaurants in Argentina.

The following chart lists the eight PE-backed considering an IPO:

HCA’s initial public offering on Wednesday raised about $3.79 billion and represents the largest private equity-backed IPO ever. The hospital operator’s selling shareholders include its founder Dr. Thomas Frist, along with buyout shops Bain Capital Partners LLC, Kohlberg Kravis Roberts & Co. and BAML Capital Partners (which was previously known as Merryll Lynch Global Private Equity). The three firms retain a stake in HCA.

All told, 2011 has seen the best start for U.S. IPO activity since 2000. Domestic IPO activity has totaled $12.5 billion so far this year and those with PE-backers account for $10.4 billion of the total, according to data obtained from the Thomson Reuters database.

In fact, half of the top 10 IPOs that have taken place in the U.S. this year are PE-backed, including the $3.29 billion raised by Kinder Morgan Inc. on Feb. 10. Kinder Morgan is an energy company backed by Carlyle Group, GS Capital Partners LP, Highstar Capital and Riverstone Holdings LLC.