Bloomberg News

Facebook Adds Deutsche Bank, Citi, Credit Suisse on IPO

March 02, 2012

Facebook's new corporate headquarters in Menlo Park, California. Photographer: Peter DaSilva/EPA/Corbis

Facebook's new corporate headquarters in Menlo Park, California. Photographer: Peter DaSilva/EPA/Corbis

Facebook Inc. (FB) hired Deutsche Bank AG (DBK), Credit Suisse Group AG (CSGN) and Citigroup Inc. (C) to work on its $5 billion initial public offering and give it access to more credit, a person with direct knowledge of the situation said.

Facebook’s new and existing banks will grant the company an additional credit line of more than $2.5 billion, said the person, who declined to be identified because the decision isn’t public. Morgan Stanley, JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp., Barclays Plc and Allen & Co. were the previously hired on the IPO.

The move would give the social network, whose sales almost doubled to $3.71 billion last year, a pipeline of more than $5 billion in possible borrowings. That compares with a $3 billion credit line for Google Inc. (GOOG), the most valuable U.S. Internet company. While going public with debt is unusual for a Web company, the move by itself may not damp demand for Facebook shares, said Sameet Sinha, an analyst at B. Riley & Co.

“The demand for Facebook’s stock is going to be so high that I think most investors are just going to overlook this aspect,” said Sinha, who is based in San Francisco. “I don’t see it impacting the overall valuation.”

Facebook, led by co-founder Mark Zuckerberg, filed for the IPO last month, pursuing what may be the largest Internet offering on record.

Tax, Legal Bills

The expanded credit line will help Facebook (FB) pay post-IPO taxes and the potential legal costs of patent litigation with Yahoo (YHOO)! Inc., according to the person. Yahoo (YHOO), based in Sunnyvale, California, asked Facebook this week to license technologies covered by its intellectual property, and threatened to take legal action if no agreement is reached.

The additions will be disclosed in a new regulatory filing in the coming weeks, the person said. The first group of banks, excluding Allen, have already pledged $2.5 billion through a revolving credit facility to the Menlo Park, California-based company, according to a filing last month.

Citigroup and Credit Suisse representatives declined to comment, as did spokesmen for Facebook and Deutsche Bank. A representative at Morgan Stanley (MS), which is leading the offering, also declined to comment.

Facebook filed to raise $5 billion in its IPO, though the amount may change. It had been discussing raising as much as $10 billion, a person with knowledge of the matter said late last year. At that size, Facebook’s IPO would be the biggest ever by an Internet or technology company, data compiled by Bloomberg show. Facebook’s implied market value stood at about $93 billion, based on an auction this week via SharesPost Inc.

Banks handling Facebook’s IPO may collect fees of as little as 1 percent to 1.5 percent of the total amount raised in the sale, two people with direct knowledge of the matter said on Feb. 1.

Reuters previously reported that Facebook intends to increase its credit line.

To contact the reporter on this story: Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net


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