Two IPOs to Top $1 Billion This Week

This week heralds the arrival of two new stock offerings in the U.S. that should top the billion-dollar mark, with Brazil’s No. 4 bank and America’s largest property-and-casualty insurance-data specialist aiming to debut.

Banco Santander Brasil SA, which is being carved out of Spain’s Banco Santander SA, is holding a global stock offering that could top $7 billion, making it one of the world’s largest this year. Verisk Analytics Inc., owned by a group of large insurers, is selling $1.7 billion in a U.S.-only deal. Both plan to launch Wednesday, with Verisk listing on Nasdaq under the trading symbol VRSK, and Banco Santander Brasil doing a dual listing on the New York Stock Exchange as BSBR and on the Bolsa de Valores, Mercadorias e Futuros as SANB11.
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“These are two really unique deals,” says Francis Gaskins, president of research firm IPOdesktop.com. The potential for banks to grow in emerging markets like Brazil is a draw for investors, and Verisk’s strong cash flow and dominant position in its data and analytics niche should prove also attractive, he said.

Banco Santander Brasil’s deal isn’t technically an IPO — the bank has a thin public float of 2% of its common shares in Brazil — but the public sale of 15% of the company is being dubbed an IPO by many analysts and bankers because it is the first time a real trading market can be made in its shares.

By almost every measure, Banco Santander Brasil has been growing during the rough world economic climate, due in part to its acquisition of Banco Real in August 2008 and organic growth from pre-existing operations. Assets, customers, total deposits and profits rose in 2008 and again in the first half of 2009.

Morningstar Inc. analyst Maclovio Pina put a fair value of $13 per American depositary receipt on Banco Santander Brasil, roughly the midpoint of its expected range. In a research note, he said the country will “provide lush grounds” for the bank to grow despite some short-term challenges. While the Brazilian economy seems to have stabilized, near-term growth could be difficult and nonperforming loans are still on the rise, he noted.

Verisk, which was formed in 1971 as an advisory and ratings organization for the property- and casualty-insurance industry, has grown to become the largest aggregator of actuarial and underwriting data for that insurance segment. All the shares in its deal are being sold by its owners, a group of insurers that includes American International Group Inc., London-based ACE Group Holdings Inc., Hartford Financial Services Group Inc. and Travelers Cos.

Verisk also provides statistical models and analytics to help detect fraud and quantify losses. Its revenue and net income have increased steadily in recent years, including through the economic downturn.