Cummins engine filtration unit IPO to brave debt ceiling jitters

Cummins

25/05/2023 18:10

By Echo Wang
       May 25 (Reuters) - Cummins Inc  CMI.N  is pressing ahead
with plans to price the initial public offering (IPO) of its
engine filtration division on Thursday, defying the market
volatility fueled by concerns over the lack of a deal to raise
the U.S. debt ceiling.
    The carved-out division, Atmus Filtration Technologies Inc, 
is seeking to raise about $275 million by signing up investors
to the IPO on Thursday evening, before its shares start trading
in New York on Friday.
    It is a bet that market volatility, which can be detrimental
to IPOs because it dents investor confidence in a company's
valuation, will not derail the offering. The markets have been
on edge over the timing of an eventual deal between the White
House and Republicans in Congress to raise the debt ceiling
ahead of the June 1 deadline set by the U.S. Treasury. 
    Despite the elevated volatility, however, the Cboe
Volatility Index, known as Wall Street's "fear gauge," remains
below 20, the level many bankers say makes it difficult to price
IPOs. The VIX has been above 20 most of the time since the first
quarter of 2022, as the war in Ukraine and interest rate hikes
by central banks fueled market jitters. This created an IPO
drought, with only a few stock market hopefuls bucking the
trend. 
    Companies have raised about $2.2 billion in the first
quarter this year, compared to more than $42.6 billion during
the same period in 2021, according to Dealogic.
    The Atmus IPO follows in the steps of Johnson & Johnson's
 JNJ.N  consumer health business Kenvue Inc  KVUE.N , which
raised $3.8 billion earlier this month in the largest IPO of
this year. 
    Atmus provides filtration products for trucks, off-highway
industrial equipment and power generation systems.
    Columbus, Indiana-based Cummins will control about 83% of
the company's shares after the listing on the New York Stock
Exchange. 
    Goldman Sachs & Co. GS.N , and JPMorgan Chase & Co. JPM.N ,
are the lead underwriters for the IPO.

 (Reporting by Echo Wang in New York; Editing by Paul Simao)
 ((E.Wang@thomsonreuters.com; +13322191785; Reuters Messaging:
@deer_echo_))