Google gives float to Morgan and Goldman

The Sydney Morning Herald is reporting that Google has hired Morgan Stanley and Goldman Sachs Group to arrange its initial public offering, a sale that might raise as much as $US4 billion ($5.2 billion), a banker involved in the transaction said. The sale by Google, the world’s most used internet search engine and owner of Pyra Labs, creators of Blogger, is set to be the biggest of the year.

California based Google might sell a stake of about one-third in the IPO, giving the company a market value of about $US12 billion, the bankers said. The group would probably register the shares for sale this month and sell them by April, they said.

By selling now, Google would take advantage of a rally in computer-related shares. The Nasdaq Composite index, with 42 per cent of its value coming from technology stocks, has climbed 45 per cent in the past 12 months, closing yesterday at its highest level since January 2002.

Morgan Stanley and Goldman Sachs would lead a group of underwriters that includes Citigroup, Credit Suisse First Boston, JP Morgan Chase, Thomas Weisel Partners LLC and WR Hambrecht, two bankers in the sale said.

Merrill Lynch, which has the biggest brokerage force in the world, lost its bid to help arrange the sale. Merrill Lynch spokesman Michael Duvally declined to comment.

Google, Morgan Stanley and Goldman Sachs declined to comment, as did Citigroup, CSFB and JP Morgan.

The fees generated from Google’s IPO might be as much as $US280 million if the company raises as much as $US4 billion, based on a 7 per cent fee. Fees for the biggest IPOs are usually lower than the standard 7 per cent. On CIT’s sale, bankers collected commissions of 4 per cent. That’s still more than the 0.9 per cent for corporate bonds and about 0.3 per cent for advice on mergers.

There’s “a lot of buzz around” the Google sale, said Reed Taussig, chief executive officer at Callidus Software, a California-headquartered company.

Morgan Stanley has taken public at least six companies backed by Kleiner Perkins Caufield & Byers, one of Google’s venture investors. Those sales included Netscape Communications, whose August 1995 IPO ushered in the internet boom.

Goldman Sachs has arranged IPOs for at least four companies backed by Sequoia Capital general partner Michael Moritz, a venture investor in Google. They include Google rival Yahoo, Webvan Group, PlanetRx.com and Etoys. Goldman also arranged the IPO of Google rival EBay, which has a market value of about $US42 billion.

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The assignment for WR Hambrecht, which sells shares via the web through an auction process, will be its biggest ever. Its share of the Google sale may exceed the $US309.2 million of IPOs it has done since its first in April 1999.

In WR Hambrecht’s internet-based IPO bidding process known as the “open IPO”, individual and institutional investors enter the amount of shares they want to buy and the price they are willing to pay.

The bank finds the clearing price by tallying all bids and finds the highest price in which all shares can be sold.

edited copy from SMH.com.au