Aquila's IPO Sizzles on NYSE

Aquila Inc. made its initial public offering in grand style last week, becoming one of the hottest traded IPOs in a lackluster market, coming off the blocks at an opening price of $29.75 on the New York Stock Exchange --- almost 25% above its offering price of $24. The first-day offering raised about $430 million, and was the third-most actively traded stock on the NYSE Wednesday, with more than 7.8 million shares changing hands.

By the end of the day Wednesday, Aquila, one of the top North American power and gas wholesalers, saw its stock price finally close at $27.90. Just two weeks ago, Aquila said it expected to sell 16.5 million shares at between $21 and $23 each. Three months ago, the IPO price was estimated to be between $17 and $22 a share.

The UtiliCorp United Inc. subsidiary "is going to be one example of the new look for the IPO market in the post valuation adjustment period we just underwent: real companies with real growth and earnings prospects," said David Menlow of IPOfinancial. "Certainly, it doesn't hurt that the company is growing at an 83% rate over the last five years, with a steady 55% in just the last three."

Kansas City, MO-based UtiliCorp, which will continue to own 80% of Aquila, increased its initial IPO of 16.5 million Class A common shares to 17.5 million. Of the 17.5 million shares, 12.25 million will be sold by Aquila and 5.25 million will be sold by UtiliCorp. Underwriters still have the option to purchase an additional 1.975 million shares from Aquila and 500,000 shares from UtiliCorp to cover any overallotment of shares.

UtiliCorp also owns approximately 98% of Aquila with 81.5 million Class B Aquila shares, and has said that a tax-free distribution to shareholders is expected to be completed within 12 months after the IPO is completed.

The joint book-running managers for the offering were Lehman Brothers and Merrill Lynch & Co., with co-managers Salomon Smith Barney, Credit Lyonnais Securities (USA) Inc. and JP Morgan.

Menlow, who said Aquila was his pick of the week, noted that some of Aquila's products, such as Guaranteed Weather, are a "big client draw" for new business. He also expects to see other energy IPOs, but he said they would have to go a long way to be as attractive as Aquila.

In the meantime, energy IPOs look like they are here to stay "as long as the market doesn't get flooded with offerings, or the price valuations don't get ahead of the market," said Menlow.

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