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Walter to take spinoff public

The IPO of Mueller Water Products tests the theory that its parent company's coal, home-building and water divisions are worth more when separated.

By SCOTT BARANCIK
Published May 13, 2006

Walter Industries Inc.'s water division plans to go public this month at $16 to $18 per share, raking in nearly a half-billion dollars, according to a regulatory filing Friday.

Mueller Water Products Inc., a leading maker of fire hydrants and other water-infrastrucure goods, is expected to issue 23.5-million shares of stock to its six underwriters about May 25 and begin trading the next day under the symbol "MWA." The underwriters will have the option to purchase an additional 3.5-million shares.

To drum up interest in the IPO among institutional investors, Walter executives are embarking on an extensive road show.

"Every single day, we'll be in another city," said Joe Troy, who heads the Tampa company's mortgage unit.

The IPO will test a theory, long propounded by top investors and Wall Street analysts, that Walter's coal, homebuilding and water divisions are worth more apart than together. Walter is mulling a similar spinoff of its homebuilding and mortgage units, though that plan would not raise any funds.

According to Friday's filing, Walter plans to retain 76 percent or more of Mueller's stock after the IPO but will distribute those shares to Walter stockholders at yearend. Mueller will use the proceeds of the offering to retire debt and fund general initiatives. It expects to issue dividends of 7 cents per share during the first year.

Despite the good cheer surrounding the IPO, one stock research firm recently sounded a shrill warning about Walter's condition.

Late last month, the Center for Financial Research and Analysis, a forensic accounting firm based in Rockville, Md., said problems such as rising inventory levels, higher pension deficits and accounting issues at Walter led it to rate the company a "significant concern," the second-worst rating in the center's five tiers.

But overall, Wall Street remains bullish on Walter, whose stock was the Tampa Bay area's best performer in 2005 and rose 2 percent Friday to close at $68.90 per share. Earlier in the day, the Brean Murray Carret brokerage firm initiated coverage of Walter with a "strong buy" rating.

Troy, the Walter executive, said his only comment on the center's forensic report was that it contained "a variety of errors."

Scott Barancik can be reached at barancik@sptimes.com or 727 893-8751.

[Last modified May 13, 2006, 08:04:26]