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Liberty Mutual Leads Four U.S. IPOs With Biggest Sale of 2010

Liberty Mutual Agency Corp. will lead the busiest day for U.S. initial public offerings in eight weeks as it seeks to raise $1.3 billion in the country’s biggest IPO of 2010.

The insurer, a Boston-based unit of Liberty Mutual Holding Co., is offering 64.3 million Class A shares at $18 to $20 each today, according to filings with the Securities and Exchange Commission. ChinaCache International Holdings Ltd. and two other companies will seek to raise a combined $426 million today, while China Ming Yang Wind Power Group Ltd. will follow tomorrow with a $400 million IPO, SEC filings show.

U.S. IPOs have started to rebound this month, with offerings from China’s SouFun Holdings Ltd. and Country Style Cooking Restaurant Chain Co. surging at least 47 percent after more than half of 2010’s deals left buyers with losses. Liberty Mutual Agency is seeking to sell almost twice the amount of this year’s largest initial sale at a 16 percent premium to its competitors, data compiled by Bloomberg show.

“Investors will be leaning more toward offerings that provide a higher growth profile” than Liberty Mutual, said Walter Todd, co-chief investment officer at Greenwood Capital in Greenwood, South Carolina, which oversees about $800 million. “China specifically certainly piques people’s interest.”

Property Insurance

Citigroup Inc. in New York and Bank of America Corp. of Charlotte, North Carolina, will lead the sale for Liberty Mutual Agency. The second-largest writer of property and casualty insurance distributed through independent agencies in the U.S. will use proceeds to help repay debt to its policyholder-owned parent, which will maintain a majority stake, the filing shows.

Sales at property-casualty insurers have been pressured since 2007 by the U.S. economy’s longest recession since the Great Depression. An unemployment rate near 10 percent means builders and manufacturers have less need for workers’ compensation coverage than before the recession, and individuals have been scaling back coverage of homes and autos.

U.S. property and casualty sales gained for the first time in 13 quarters in the three months ended June 30 as carriers including Northbrook, Illinois-based Allstate Corp. raised rates to counter the slowdown in demand. Second-quarter policy sales rose 1.3 percent to $107.6 billion from the year-earlier period, the Property Casualty Insurers Association of America said Sept. 16 in a statement.

‘Steady Business’

Liberty Mutual “is not a high-growth company, and property-casualty is still a very competitive area,” said Paul Bard, director of research at Greenwich, Connecticut-based Renaissance Capital LLC, which has studied IPOs since 1991. “But Liberty does have a steady business.”

Property-casualty carriers including Travelers Cos., the New York-based insurer added to the Dow Jones Industrial Average last year, and Warren, New Jersey-based Chubb Corp. sidestepped the worst of the financial crisis by investing in municipal bonds and corporate debt rather than holdings tied to the housing market.

“The majority of property and casualty carriers do not have sizable exposures to problematic asset classes such as real estate-related investments, where risks remain elevated,” said Bruce Ballentine, a New York-based analyst at Moody’s Investors Service, in an Aug. 30 report. “On average, 25 percent of property and casualty insurers’ investment portfolios are in municipal bonds, and the portfolios generally are of high quality.”

Relative Value

At the midpoint price of $19, Liberty Mutual Agency’s shares are valued at 1.3 times tangible book value, according to in Marina del Rey, California. That’s higher than the average ratio of 1.12 for Chubb, Travelers, and three other companies Liberty Mutual Agency cites as competitors in its prospectus, data compiled by Bloomberg show.

Liberty Mutual Agency’s offering would surpass the $676 million raised in June by Houston-based Oasis Petroleum Inc. as this year’s biggest U.S. IPO. General Motors Co. of Detroit may seek $8 billion to $10 billion in a November initial sale, two people familiar with the matter said last week.

ChinaCache International Holdings, the Beijing-based provider of Internet content to businesses and government agencies, is selling 5.5 million American depositary receipts at $10 to $12 each today. Bank of America and Frankfurt-based Deutsche Bank AG are arranging the deal, the prospectus shows.

China Ming Yang Wind Power, the Zhongshan, China-based maker of wind turbines, is offering 25 million ADRs at $14 to $16 each tomorrow. Morgan Stanley in New York, Credit Suisse Group AG of Zurich and Bank of America are leading the offering, SEC filings show.

Best Performers

Chinese companies account for five of the 10 best-performing IPOs in the U.S. this year, according to data compiled by Bloomberg. SouFun, the Beijing-based operator of China’s biggest property website, posted the second-largest first-day gain for a U.S. IPO this year, climbing 73 percent on Sept. 17 after raising $125 million. Country Style Cooking Restaurant, which operates fast-food outlets in Chongqing, China, surged 47 percent yesterday after raising $82.5 million.

Elster Group SE, the Essen, Germany-based provider of gas, electricity and water meters, is offering 16.2 million ADRs at $16 to $18 each today. Deutsche Bank, along with New York-based Goldman Sachs Group Inc. and JPMorgan Chase & Co., is arranging the deal.

Rhino Resource Partners LP, the Lexington, Kentucky-based operator of coal properties, is selling 3.24 million units at $19 to $21 each. Raymond James Financial Inc. of St. Petersburg, Florida, Toronto-based Royal Bank of Canada, and Stifel Financial Corp. of St. Louis are leading the offering.

Stock Market Rebound

The last time more companies sold shares on the same day in the U.S. was Aug. 5, when five completed deals, data compiled by Bloomberg show.

At least 44 companies have postponed or withdrawn initial sales this year as concern that the economic recovery is deteriorating sent the Standard & Poor’s 500 Index down as much as 16 percent from its 2010 high on April 23 through July 2. The benchmark gauge has rallied 9.4 percent this month as reports on durable goods orders and initial jobless claims convinced some investors the U.S. won’t fall back into a recession.

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