Investors lured by healthier stock markets and private equity firms eager to unload stakes in their portfolio companies are setting the stage for the return of billion-dollar-sized initial public offerings to the United States.

The size of several recent deals and new IPO applications has grown larger than what has been typical in the past year, illustrating how companies and their backers are vying to take advantage of the improved IPO market after one of its worst droughts in years. And bankers expect the trend to continue.

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

This 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 last week, 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,KKR.UL, 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.

BIG DEAL

The last U.S.-based IPO to top the billion-dollar mark was a $1.36 billion deal by American Water Works Co Inc in April 2008, according to Thomson Reuters data.

But if the recent spate of new IPO filings is any indication, that lull could end in the near future.

Two new filings this week -- by fruit producer Dole Food Co Inc and Rio Tinto's U.S. coal business, Cloud Peak Energy Inc, both seeking to raise up to $500 million -- are more modest than the JBS and Hyatt proposals but would still rank among 2009's top deals.

Yet, despite the growing size of IPOs and new filings, U.S. deals are not likely to match the megadeals overseas soon.

Those deals include China State Construction Engineering Corp's $7.3 billion IPO in July and VisaNet, the Brazilian affiliate of credit card network Visa Inc, which raised $4.3 billion in June.

For one thing, many of the top Chinese IPOs have been privatizations of state companies, the bankers said.

For another, U.S. firms don't necessarily go for the mega-IPOs, even if there is demand.

In the United States, you have breadth; you can do small deals or mega-deals, Deutsche Bank's Hantho said.

Part of that may have to do with the fear of swamping the market and devaluing an offering.

A lot of U.S. issuers would rather do a smaller IPO and then do follow-ons down the road, Bank of America's Carnoy added.

Still, the recovery of the IPO market is indisputable, meaning larger deals are inevitable, the bankers said.

Investors have come back in force since March and they are being rewarded for participating in deals, Carnoy said.

(Reporting by Phil Wahba, editing by Gerald E. McCormick)

Investment