Avaya Sets Plans to Go Public, Again

Private-Equity Owners Test Appetite for $1 Billion Offering

Avaya has commented and said "Avaya does not comment on rumors or speculation". However, we think this is bound to happen.

Here is the article from The Wall Street Journal:

Avaya Inc., a maker of phones and other telecommunications gear, plans to file for a $1 billion initial public offering as early as this week, according to people familiar with the matter, making it the latest technology company seeking to tap into a resurgent IPO market.

The offering for about 20% of Avaya, which was taken private by buyout firms Silver Lake and TPG Capital in 2007, could value it at $5 billion or more, the people said. The exact numbers—and indeed whether the private-equity firms can pull off the IPO—will depend on market sentiment at the time of the offering. Typically, there is a lag of two months or more between the filing of an IPO and its trading debut.

Back to Market: In 2000, Avaya executives celebrated the company's listing on the New York Stock Exchange. It was taken private in 2007.

Avaya's business has been buffeted by anemic corporate telecom spending and a weak global economy. In its fiscal year ended Sept. 30, Avaya had $5.1 billion in revenue, up 22% from the year before but little changed from 2003. Last year's revenue gain was mainly the result of an acquisition. The company reported a loss for the full year of $874 million.

In spite of the company's losses, Avaya's owners stand to do well on the IPO deal that's under discussion, according to a person familiar with the matter, though it is unclear how well. In buyout deals, private-equity firms typically only put up a third or less of the purchase price and borrow the remainder. So though Silver Lake and TPG paid about $8 billion for the business, most of that was borrowed and a chunk of the debt has since been repaid.

For buyout firms, opportunities to exit their investments had all but disappeared during the financial crisis and subsequent recession. They have been encouraged to test the public markets again in the past year as the economy recovers.

Meanwhile, a spate of tech companies have made plans to go public in recent months, a trend that has gathered steam following the eye-popping debut of professional-networking site LinkedIn Corp. last month. In what may be an even more hotly anticipated deal, Groupon Inc. last week filed for an IPO that could value the money-losing e-commerce company at more than $20 billion.

Avaya, however, is unlikely to drum up the same level of investor interest as today's Internet darlings; a better proxy for the company might be Freescale Semiconductor Holdings, the private-equity-owned chip maker that had a lackluster market debut late last month.

Either way, the tech frenzy has helped reignite an IPO market that was in the doldrums as a result of global financial and economic uncertainty. May was the most active month for U.S. IPOs this year, with 18—the largest crop since December, when 19 companies went public.

Basking Ridge, N.J.-based Avaya began as a part of AT&T Inc., then became part of AT&T spinoff Lucent Technologies. In 2000, Avaya was spun off by Lucent and listed on the New York Stock Exchange. Avaya was later taken private by Silver Lake and TPG. It sells phones and other telecommunications gear to corporations. It also sells hardware and software used in the call centers that companies use to communicate with retail clients.

The lead underwriters for the offering, which at $1 billion would be the fourth-largest IPO of a U.S. company this year, according to Dealogic data, are Goldman Sachs Group Inc., Morgan Stanley and J.P. Morgan Chase & Co. Citigroup Inc., Barclays Capital and Credit Suisse Group are also among the banks planning to underwrite the offering.Avaya could draw the interest of an acquirer now that it is effectively in play, though that isn't likely, one of the people said.

Avaya isn't the only company of its kind eyeing an ownership change. Alcatel-Lucent, the Franco-American telecom equipment maker, is seeking a buyer for its corporate unit, which is likely worth more than $1 billion, people familiar with the matter have said. Alcatel-Lucent could also decide to take the division public, the people said.