Welsh Property, Nobao Renewable Energy Postpone This Week's Only U.S. IPOs

Welsh Property Trust Inc. and Nobao Renewable Energy Holdings Ltd. postponed their initial public offerings as the slump in global capital markets scuttled this week’s only U.S. IPOs.

Welsh Property, the Minnetonka, Minnesota-based real estate investment trust that operates industrial and office properties, pulled a $345 million offering yesterday, according to a Securities and Exchange Commission filing and Bloomberg data. Nobao, a Shanghai-based provider of temperature-control systems, shelved a plan to raise $180 million.

The postponements came after Europe’s sovereign-debt crisis sent the MSCI World Index of developed-nation stocks to a 9.9 percent decline last month and helped spur at least 26 companies worldwide to pull IPOs since the start of May. Welsh Property was seeking a premium of about 70 percent to rival REITs.

“Investors have been stung by IPOs,” said Timothy Cunningham, who helps oversee about $57 billion at Thornburg Investment Management in Santa Fe, New Mexico. “The quality of the companies hasn’t been great, they’ve been pretty aggressive on the pricing side, and it’s been a tough market.”

UBS AG of Zurich and New York-based JPMorgan Chase & Co. led Welsh Property’s offering, while UBS and Citigroup Inc. of New York managed Nobao’s sale.

Welsh Property had cut the price of its initial sale to $16 to $16.50 a share yesterday from $19 to $21, an SEC filing showed. It increased the number of shares in the offering to 20.9 million from 17.5 million.

Relative Value

At its original midpoint price, Welsh was valued at 1.67 times net tangible book value, a measure of shareholder equity that excludes assets that can’t be sold in liquidation. That’s 70 percent higher than the median ratio of 0.98 for 50 diversified REITs globally, data compiled by Bloomberg show.

Nobao was seeking a valuation of about 37.7 times estimated 2011 earnings at its midpoint offering price, according to a note last week from Independent International Investment Research Plc. That’s more than double the ratio of 14.5 for WaterFurnace Renewable Energy Inc. of Fort Wayne, Indiana, and 13.7 for Harbin, China-based Harbin Air Conditioning Co., the London-based IPO research firm said.

“It’s going to be hard to raise capital for anything that doesn’t have a solid track record or anything that appears to be aggressively valued,” said Tom Samuels, who helps oversee about $120 million at Palantir Capital Management in Houston. “There’s a bit of a disconnect between what buyers want and what sellers want.”

Private-Equity IPOs

While Welsh Property and Nobao pulled their sales, a filing yesterday from New York-based Nielsen Holdings BV was the latest sign that the slump isn’t dissuading private-equity firms from pushing ahead with some of the biggest offerings of 2010.

Leveraged-buyout funds, which spent a record $1.6 trillion on deals from 2005 to 2007, are selling assets in initial share sales after returning less money to clients last year than any time since at least 2000. IPOs from U.S. companies backed by private-equity firms are losing money for investors for the first time in a least a decade, data compiled by Bloomberg and Greenwich, Connecticut-based Renaissance Capital LLC show.

Nielsen, the television-audience rating company owned by New York-based KKR & Co., Thomas H. Lee Partners LP of Boston, Blackstone Group LP in New York and Washington-based Carlyle Group, filed to raise as much as $1.75 billion.

HCA Inc., the hospital chain bought four years ago in a $33 billion LBO led by KKR and Bain Capital LLC of Boston, filed last month to sell as much as $4.6 billion. The Nashville, Tennessee-based company’s U.S. IPO would be the largest since Visa Inc. of San Francisco raised $19.7 billion in March 2008.

Toys “R” Us Inc., the Wayne, New Jersey-based retailer acquired by KKR, Bain and Vornado Realty Trust of New York in 2005, said last week it plans to raise as much as $800 million.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Lee Spears in New York at lspears3@bloomberg.net.

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