“We’re going to see more than a handful of mega-IPOs file over the next month or two,” said Lisa Carnoy, global head of equity capital markets at Bank of America Merrill Lynch.

In recent weeks, the US unit of the world’s largest meat processor, Brazil’s JBS SA, has filed to raise up to US$2 billion in an IPO, while Hyatt Hotels Corp plans to raise as much as $1.15 billion.

Last week saw an $810 million IPO by real estate investment trust Starwood Property Trust Inc, likely to become the year’s largest should underwriters exercise their option to buy additional shares, while the week earlier, chipmaker Avago Technologies Ltd. launched a $648 million IPO.

IPOs will get bigger in part because of a rush by private equity firms, made hopeful by the successful IPO by Avago, owned partly by Kohlberg Kravis & Roberts & Co, to sell off large portfolio companies.

“Deal sizes are likely to get larger because of the huge supply from the financial sponsors – now you have dozens of companies that have equity values of $10 billion to $20 billion, so those IPOs by definition have to be large deals,” Carnoy said.

Even after launching the second-largest corporate IPO of the year, Avago is still about 85 percent held by KKR and other private equity firms.

The strong performance of IPOs this year – 15 of the 17 corporate IPOs have jumped on their first day of trading – has brought back previously reticent investors, widening the pool of confident market participants and making it easier to absorb massive IPOs, the bankers said.

“When you get to these larger IPOs, you need a broad cross-section of institutional and retail ownership to make them work,” said Mark Hantho, global head of equity capital markets at Deutsche Bank.

“As confidence is returning to the markets, you will get a broader reception to IPOs, and can do a larger deal.”

Source: Reuters