IPO Watch: OGE Enogex Partners L.P.

Ann C. Logue | Jan 15, 2008 6:20am EST | Comment

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OGE Enogex Partners L.P.
www.enogexpartners.com
NYSE: OGP
Scheduled for the week of Jan. 14
$142.5 million estimated proceeds
$468.5 million estimated post-money valuation

The University of Oklahoma’s football team lost its bowl game, which made me sad because the coach’s father was my high school American history teacher. Yes, there’s a tangential relationship between my anecdote and the OGE Enogex Partners IPO: OGE is Oklahoma Gas and Electric, and its parent company, OGE Energy, is spinning out its gas midstream services business that collects natural gas from wells in Oklahoma and the Texas panhandle, then processes, transports and stores the gas until other utility companies need it.

This business is set up as a limited partnership, offering units instead of shares. Unlike shareholders, unit holders can’t vote on the general partner or the board of directors, but they should receive good-sized cash distributions. The partnership itself doesn’t pay income taxes. Instead, it sends partners a form listing their share of the income and expenses, and then the partner pays the applicable taxes. This makes limited partnerships popular with such tax-exempt investors as pension plans and charitable endowments. When those investors buy shares in a corporation, the corporation pays taxes before making any distributions. With a limited partnership, a partner who doesn’t have to pay taxes has the potential to make bigger profits off of the investment.

OGE Enogex Partners plans to pay $0.34 per quarter ($1.35 per year) per unit, to change based on the performance of the business. If natural gas prices increase, then the partners should be making money. OGE Enogex had limited partnership income of $20.2 million on $659 million in revenue for the first nine months of 2007. It plans to pay down debt with the offering proceeds.

Upcoming IPOs:

Cascal B.V. (www.cascal.co.uk; NYSE: H; Jan. 21; $532 million post-money valuation): Cascal operates drinking water and waste water treatment facilities in the United Kingdom, South Africa, Indonesia, China, Chile, Panama, Mexico and the Philippines. Given that clean water is a rare commodity in many of these places, the company has been able to post good growth. In the year ending March 31, 2007, Cascal earned $8 million in net income on $121.7 million in revenue. Adjusted for acquisitions, the numbers were $16.2 million in net income on $138 million in revenue. Cascal is owned in part by Biwater, a British water services company that will hold 43.5% of Cascal stock after the deal closes.

RiskMetrics Group (www.riskmetrics.com; NYSE: RMG; Jan. 21; $1040.4 million post-money valuation): It’s somewhat ironic that a corporate governance firm is going public, or maybe it’s fitting that it making itself transparent. RiskMetrics has two business lines, a portfolio risk evaluation service called RiskMetrics and a shareholder proxy advisor service called Institutional Shareholder Services. One of the company’s current shareholders is Arthur Levitt, former chair of the U.S. Securities and Exchange Commission. RiskMetrics earned $0.7 million on $110 million in revenue for the six months ended June 30, 2007.

BG Medicine (www.bg-medicine.com; Nasdaq: BGMD; Jan. 28; $208.1 million post-money valuation): BG Medicine is working to develop diagnostic tests using biomarkers that would indicate which patients are most likely to respond to which therapies, saving money and improving medical care. The company has some revenue from licensing its technology to drug manufacturers that want to develop complementary products. But BG is losing money — $4.7 million in 2006 — and it may take a while for its prospects to turn. The company had originally filed to go public on Euronext Amsterdam at a range of $14 to $16 per share; that has since been cut to $8 to $10 on Nasdaq.

Cumberland Pharmaceuticals (www.cumberlandpharma.com; Nasdaq: CPIX; Jan. 28; $377.4 million post-money valuation): Cumberland develops niche products, the idea being that it is easier for a small company to sell to a concentrated physician base than to every general practioner out there. Its lead product is an exemplar: Acetadote, an injectable drug for liver poisoning brought on by overdoses of acetaminophen (best known by its brand name, Tylenol). The company also markets a prescription laxative and is developing two new products, a treatment for fluid buildup in the lungs of cancer patients and one for fungal infections in people with compromised immune systems. Cumberland has been profitable for a few years and earned $3.2 million in net income on $20.6 million in revenue for the first nine months of 2007.