Dolby Labs to Go Public Next Week

Dolby Laboratories Inc. (search) , a household name in cutting-edge audio technology for 40 years, is slated to become a public company next week when it lists on the New York Stock Exchange (search).

Dolby's initial public offering, expected on Wednesday, headlines a week of slim pickings for such deals but a heavy one in terms of the capital that companies hope to raise.

Dolby, a leader in digital surround sound, home theater systems, digital video recording, high definition television and DVD players, plans to sell 27.5 million shares for between $13.50 and $15.50.

Founder Ray Dolby (search) will be selling 17 million of those shares and intends to emerge from the IPO with a 69.8-percent stake in the new listed company.

"With us moving into the flat panel age and home theater and everything else, the numbers on these guys are staggering," said Sal Morreale, a trader who tracks IPOs for Cantor Fitzgerald in Los Angeles.

"I'm not going to say slam dunk ... but it looks very strong."

San Francisco, Calif.-based Dolby said in its filing that it earned $39.8 million on revenue of $289 million in the fiscal year ended Sept. 24.

Daniel Ernst, an analyst with Hudson Square Research, a unit of Soleil Securities, set the company's price-to-estimated 2005 earnings ratio — if the shares sell at the top of the range — at 21 times, compared to a peer average of 29 times forward earnings.

"I think it's fair to say that this is a premium company with a premium product and market position," Ernst said.

"So I would argue that they would actually trade in the public market at a premium to the public group so we thought a 30 to 35 times earning range would probably be a fair value."

Assuming an offering price of $14.50 per share, Dolby would have a market capitalization of $1.4 billion.

It says it expects to use net proceeds from the IPO for general corporate purposes, including possible acquisitions, and will list on the New York Stock Exchange under the symbol "DLB".

Dolby is not the only big ticket item being taken to market next week.

Coal producer Alpha Natural Resources (search) hopes to raise about $500,000 Monday by offering 29.5 million shares for between $16 and $18.

A relatively small producer with stated coal reserves of 326 million tons, according to Standard & Poor's Corp., Alpha is heavily focused on the Central Appalachia coal region and principally works costly underground mines.

But China's booming economy and its hunger for raw commodities have driven international coal prices higher and that could prove a draw for investors, IPO analysts said.

The Abingdon, Virginia-based company posted net income of $30.8 million for the first six months of 2004, ending June 30, compared to $1.1 million a year before, but the increase was largely driven by a slate of acquisitions. Revenue in the 6-month period reached $587 million.

Net proceeds from the IPO will be used to pay down debt to certain shareholders. The shares will be listed on the New York Stock Exchange under the symbol "ANR".

Another deal on the table for next week is Cendant Corp.'s payment-processing unit Wright Express Corp. (search), which hopes to raise a little short of $1 billion for its parent by selling 40 million shares for between $19 and $21 a share.

The IPO, expected on Tuesday, is part of Cendant's plan to focus on core real estate and travel businesses after it bought online travel agency Orbitz Inc. in a $1.25 billion takeover.

Last June, the company — which also owns Avis car rental, the Days Inn hotel brand and Century 21 real estate — spun off Jackson Hewitt Tax Service Inc.

Finally, the IPO of real estate investment trust ECC Capital Corp. is expected to take place Monday.

Irvine, California-based ECC on Friday revised the terms of its offering to increase the number of shares to 57.2 million from 49.6 million, and to cut the projected price range to $6.75 to $7.25 per share from $9 to $11.