Avista May Sell Advantage Unit

Avista(AVA Quote), an electric and gas utility holding company, said Tuesday that it had hired investment research firm Goldman Sachs to explore the options for its business-to-business subsidiary Avista Advantage.

Avista Advantage provides Internet-based billing, payments and energy analysis aimed at cutting costs for customers like AT&T(T Quote), Home Depot (HD Quote) and Kinko's.

T.M. Matthews, president and chief executive, said the possibilities for the unit include an initial public offering or spinning it off to shareholders.

Avista's shares rose 5/16, to 37 1/16, Tuesday morning. (Avista closed up 1 1/4, or 3%, at 38).

"The news is not surprising," said Doug Fischer, an analyst at A.G. Edwards & Sons, who rates Avista's stock a maintain. "They have talked about an IPO in the past. We think that an IPO, rather than a spinoff, would be more likely." His firm has done no recent underwriting for Avista.

Fischer noted that size and volume are the driving forces in the business-to-business segment, which has high revenues and small margins.

"It might make sense to try to put this together with some other businesses like some of its competitors," Fischer said.

An IPO for Avista Advantage would place it in the same arena as rival Cadence, a joint venture between New Century Energy(NCE Quote), Florida Progress (FPC Quote) and Cinergy(CIN Quote).

In February, Cadence said that as a result of its 1,500% growth in 1999, it became the largest energy and facility cost-reduction portal in the U.S.

The Cadence network has more than 60,000 individual customer locations under contract, including those of Blockbuster Entertainment(BBI Quote), Winn- Dixie grocery stores(WIN Quote) and Papa John's restaurants(PZZA Quote).

Matthews, the Avista chief executive, has said he wants to create the highest value for shareholders, but the B2B market has been sliding since March.

"I think there are still some hefty valuations in B2B more so than energy shares," Fischer said. "Of course, the value today wouldn't be as great as a few weeks ago."

Fischer said Avista could be gauging the success of this IPO in order to do the same with Avista Labs, its fuel cell business, in the future. He acknowledged that the prospect of an Avista Lab IPO was a little more speculative at this point.