Perot Company To Go Public
After two unsuccessful bids for the U.S. presidency, H. Ross Perot is making a run for Wall Street.
Perot Systems, the Dallas information technology consulting firm founded in 1988 by the slightly eccentric Texas billionaire, has filed to raise as much as $115 million in an upcoming IPO headed by Morgan Stanley Dean Witter.
According to Perot Systems' chief financial officer, Terry Ashwill, the company has a "powerful story" to tell and should be able to overcome any weakness in the IPO market.
"With the Perot name, our customers, the size of the company ... and the strength of our financial condition, this offering should do well," Ashwill said. "We expect to sell it out many times."
The company, which generated $452.7 million for the first half of the year, should reach about $1 billion in sales for the year, Ashwill said. The company helps clients manage their information technology computer systems and develop business applications. Perot Systems concentrates on the financial, energy, health and travel industries.
Nearly a quarter of the company's 1998 revenue has come from Swiss bank UBS, which has renegotiated its contract with Perot two times in the past two years. "We cannot guarantee that our current relationship with UBS will continue on the same terms in the future," Perot Systems warns in its prospectus.
Perot, who left the company in 1992 to pursue his political aspirations and then returned last fall, owns about 41 percent of the company, so it's not a surprise that his populist-style political beliefs permeate the company's culture.
"Officially, we don't have any bosses," Ashwill said. Every one of its employees is called an associate and owns stock or options in the company. They also don't use any paper - only e-mail - to communicate with each other, according to Ashwill.
He also said the company has convinced its underwriters to allocate 40 percent of the offering to retail investors, and will probably also offer a "large segment" of the deal through E-Trade, whose CEO Chris Costakos, is friends with Perot and Ashwill.
Even the company's prospectus is a bit unusual in that it uses first-person pronouns such as "we" and "our" instead of the more impersonal terms commonly used, like "The Company."
"That's a little bit of Texas coming through," said Ashwill. "But that's how we think of ourselves, as a team."
After Oct. 8, all companies will need to write their prospectuses in plain English, according to a directive from the Securites & Exchange Commission.
Perot is no stranger to Wall Street. His success at growing Electronic Data Systems, now a Perot Systems competitor, into one of the largest consulting companies in the world should draw significant interest in the IPO, said David Menlow, president of IPO Financial Network, a research firm in Springfield, N.J.
"This will probably catch the attention of evey serious IPO investor still in the market if just for Perot's name and what he was able to do with EDS," he said.
The company, however, doesn't own Perot's name; it licenses it on a royalty-free basis from Perot and the Perot Systems Family Corp. The license can be terminated at any time for any reason, the prospectus says.
Menlow also pointed out that other large, well-recognized deals have had trouble in the market so far this year, whether it's been canceled deals from Del Monte, or flat ones from companies like USEC.
"Big deals, big names used to be carte blanche for success," he said. "Now it's cause for extra scrutiny."
Writtten By Darren Chervitz