Private equity firm TPG has hired three banks to lead manage an IPO of Australia's top department store Myer Group, sources with direct knowledge told Reuters on Tuesday, valuing Myer at about $2.1 billion. The IPO, the biggest initial public offer on the Australian stock exchange since the credit crisis took hold two years ago, underscores a return of confidence in the market and heralds a wave of new listings.

There will be a lot of things out there waiting to come to market, said Martin Duncan, an investment analyst with Fortis Investment Partners. There's still a lot of cash sitting on the sidelines. So, if you can price an offer correctly, there will be strong demand.

Myer's IPO comes amid a resurgence of global investor interest in new listings from New York to Shanghai and as private equity firms, attracted by healthier stock markets, unload holdings in their portfolio companies.

China recently saw the debut of the world's biggest IPO in a year with the listing of China State Construction Engineering Corp, while in the United States the size of several recent deals and new IPO applications has prompted analysts to forecast the return of mega-IPOs.

Macquarie Group Ltd, Goldman Sachs and Credit Suisse will lead manage the Myer IPO, two sources told Reuters. About four other banks are likely to get co-joint lead manager roles, one source said.

The sources declined to be identified as the banker appointments and other details were not yet public. TPG and Myer declined to confirm the appointment of any bankers.

Myer, which has 65 stores across Australia and about A$3 billion ($2.5 billion) in turnover, was bought by a consortium of TPG Capital, Blum Capital and Myer Family Company for A$1.4 billion in 2006.

Myer was bought from struggling retailer Coles Group, which was later acquired by conglomerate Wesfarmers Ltd.

Earlier this month, Myer said it had started a review process that may result in an IPO in the near term, potentially in 2009.

Others planning to ride the market rally include carsales.com Ltd, operator of a leading automotive website, which is launching an IPO to raise about A$250 million.

Outdoor retail chain Kathmandu, owned by private equity firms Quadrant Private Equity and Goldman Sachs, plans to raise about A$400 million in an IPO, managed by Macquarie and Goldman Sachs, a source with direct knowledge of the matter told Reuters.

IPO DISCOUNT

Typically, in Australia private equity funds have exited completely through an IPO, but the final structure of the Myer sale was still being finalised, one of the sources said.

They (the private equity consortium) would probably keep a stake, but all those things have not been decided yet, the source said.

An 80 percent sale of Myer would result in IPO proceeds of about A$2 billion.

Consumer-driven companies have benefited from Australian government stimulus packages aimed at shoring up the economy amid the global downturn.

David Jones shares have rallied about 47 percent this year, while electronics retailer J.B. Hi-Fi Ltd  has surged about 82 percent, far outpacing a 19 percent rise in the benchmark S&P/ASX 200 index .AXJO.

That bodes well for the Myer offer, fund managers say.

You only have to look at the market and see that David Jones and J.B. Hi-Fi have done very well. If you can pick a high margin business, there will be strong demand for it, Duncan said.

investors will expect the Myer IPO to launch at a discount.

There's no way they can bring Myer to market at the same P/E as DJ's. There's got to be some sort of IPO discount, Duncan said.

David Jones, which has a market value of about A$2.4 billion, has 36 stores -- half that of Myer -- and trades at a price-to-earnings multiple of about 15.

Last month, Myer lifted its fiscal 2009 profit forecast, saying it now expects its net profit to rise by mid-to-high single digits over last year. Full-year earnings are due on Sept. 11.

Myer earned net profit of A$83 million for the six months to Jan. 24 on sales of A$1.76 billion. ($1=A$1.19)

(Additional reporting by Sonali Paul and Victoria Thieberger) (Editing by James Thornhill and Valerie Lee)