ZURICH/NEW YORK - Julius Baer's U.S. asset management arm Artio Global Investors Inc is set to price its U.S. initial public offering after Wall Street closes on Wednesday in what is likely to be a test of investors' appetite for new financial issues.
Baer, Switzerland's third-biggest bank, has often said in the past it was planning to list Artio once equity markets firmed and it decided earlier this month that the time was right to cash in on higher share prices and provide a boost to its acquisition war chest.
The Artio IPO could end a 15-month drought in financial company flotations, excluding real estate investment trusts in the United States.
Artio, which had $53.3 billion in assets under management as of Aug. 31, according to a regulatory filing, plans to sell 23.4 million shares at $24-$26 per share, and raise about $585 million.
Baer will sell 21 million of those shares, halving its holdings in Artio to 35 percent and bringing in proceeds of between $504 million and $546 million.
Artio, whose investment funds include the Artio International Equity Fund, saw revenues, made up nearly exclusively of investment management fees, drop 45.6 percent in the six months ended June 30, 2009, from the year-earlier period to $133.3 million.
Its assets under management fell 40 percent in 2008 to $45.2 billion as the financial crisis hit.
Artio's IPO is part of a wider streamlining of the Swiss financial group, which is expected on Friday to reveal details of its plan to split and list its private bank and hedge fund arm GAM separately, a move welcomed by investors.
Outflows at GAM slowed in the first half, sparking optimism about its future performance, after concerns about the hedge fund industry in the crisis led investors to withdraw billions of Swiss francs in assets from the unit.
Baer will be hoping to squeeze as much money out of the listing as possible and build on an already sound capital base as a platform to expand its private bank through acquisitions.
It said over the weekend it had looked at the private banking assets Dutch bank ING Groep NV is putting up for sale and is open to discussing a deal.
Sources have told Reuters that Baer is the front-runner to buy ING's Asian and Swiss private banking assets, but they would not come cheap, with bids said to be as high as $2 billion.
Baer seems to be betting that Artio will benefit from investors' renewed enthusiasm for asset managers. The Standard & Poor's Asset Management and Custody Banks index .GSPAMCB has risen 102.3 percent from March 2009 lows.
Last week, JP Morgan raised price targets on five U.S. asset managers because of the strong equity markets.
But Artio's pricing seems aggressive at first glance, an analyst said.
Using annualized 2009 earnings, advisory firm IPO Boutique found Artio's price-earnings valuation to be much higher than that of rivals such as T. Rowe Price Group.
It may seem pricey, said IPO Boutique's senior managing partner, Scott Sweet. But, he said, Artio could benefit from Julius Baer's international reputation.
The IPO's managers, led by Goldman Sachs, have the option to buy another 3.51 million shares.
The last asset manager to go public in the United States was Fifth Street Finance Corp in June 2008. (Reporting by Jason Rhodes in Zurich and Phil Wahba in New York; editing by Gerald E. McCormick)