U.S. IPO Recap: 6 Deals Price In Another Strong Week For Filings

by: Renaissance Capital IPO Research

Led by two large deals from Puerto Rican transaction processor EVERTEC (NYSE:EVTC) and homebuilder Taylor Morrison (NYSE:TMHC), six US IPOs raised a total of more than $1.5 billion last week. All but one traded up, and two, biotech Chimerix (NASDAQ:CMRX) and enterprise SaaS company Rally Software (NYSE:RALY), gained more than 25%. Four new deals were added to the IPO calendar, and some big names such as SeaWorld (NYSE:SEAS) and Blackhawk Network (NASDAQ:HAWK) are scheduled to price this week. A new $1 billion deal from private equity-backed industrial distribution company HD Supply (HDS.RC) helped to sustain a surge in new IPO filings. Including seven last week, 15 companies have filed so far in April, which is already tied for the highest monthly total since August.

Rally jumps 27% in latest successful enterprise SaaS debut
Rally Software, which provides cloud software to manage Agile-based software development, raised $84 million on Thursday in an upsized deal (extra 250k shares) by pricing at $14, above the $11 to $13 range. Rally's fast growth (38% in fiscal 2013), large market opportunity and the current enthusiasm for enterprise SaaS IPOs supported strong trading on its first day. The stock closed at $17.81, up 27%.

Homebuilder Taylor Morrison raises $629 million
In the week's largest deal, US homebuilder Taylor Morrison raised 26% more than expected by pricing at the high end of its $20 to $22 range with almost 5 million extra shares. Confidence in the US housing recovery has been growing, and Taylor Morrison reported preliminary first quarter estimates of 30% growth in its backlog and 46% growth in net sales orders. It traded up 10%, in line with the 13% gain from homebuilder TRI Pointe Homes' (NYSE:TPH) January IPO.

Transaction processor EVERTEC trades flat
EVERTEC, a leading full-service transaction processor in Puerto Rico and Latin America, priced at the high end of the $18 to $20 range in a $505 million deal. Primary backers Apollo (NYSE:APO) and Popular (NASDAQ:BPOP) sold an extra 4 million shares. Close peer Vantiv (VNTV; up 36%) had a successful IPO in March 2012, and like Vantiv, EVERTEC has EBITDA margins near 50%. However, the company's exposure to the struggling economy in Puerto Rico (86% of revenue) contributed to a muted reception. It ended the week at $20.44, up just 2%.

KNOT Offshore Partners LP prices with 7.1% yield
KNOT Offshore Partners (NYSE:KNOP) took in $156 million deal by pricing at the high end of its $19 to $21 range. The LP, backed by a Norwegian/Japanese shipping joint venture, has a young fleet of four shuttle tankers chartered to leading E&Ps BG Group, Statoil (NYSE:STO) and Transpetro. Its charters are long-term, although the one with BG Group expires in April 2014. The stock finished the week at $22.23, up 6% and implying a 6.7% projected yield.

Chimerix pops 34% while another biotech struggles
Two development stage biotechs priced on Wednesday and had divergent receptions. Chimerix, which is developing a potent antiviral drug for use in stem cell transplants, upsized its deal to $102 million and surged 34% to $18.72 on its first day of trading. Its lead product candidate, CMX001, addresses a large, unmet need and is expected to begin Phase 3 trials in 2013. Omthera Pharmaceuticals (NASDAQ:OMTH), which has developed a prescription fish oil capsule that reduces triglyceride levels, also offered extra shares but priced far below the range ($8 vs. $12 to $14). Its lead candidate, Epanova, has completed Phase 3 trials, and, if approved, will compete with GlaxoSmithKline's (NYSE:GSK) billion-dollar Lovaza and Amarin's (NASDAQ:AMRN) Vascepa, which was approved in January. Venture backers Sofinnova Capital and New Enterprise Associates purchased more than a fourth of the deal. The stock fell 6% to $7.50.

SeaWorld's $510 million IPO among four added to the calendar
SeaWorld Entertainment, which operates 11 U.S. theme parks under brands such as SeaWorld and Busch Gardens, launched a $510 million deal on Tuesday. After being bought by Blackstone (NYSE:BX) for $2.3 billion in 2009, SeaWorld invested heavily in upgrades to its parks, and its 24 million visitors in 2012 pushed revenue up 7% to $1.4 billion. Blackhawk Network, a division of Safeway (NYSE:SWY) until 2006, set terms for a $210 million IPO. The company operates one of the largest gift card distribution networks, with cards from 500 content providers sold in 101,000 retailers, including most of the US's largest grocers.

BioAmber (BIOA), which converts renewable feedstocks into bio-succinic acid and other chemicals, announced terms for a $128 million deal. Product sales began in 2011 and reached $2 million in 2012, but investments in R&D ($20 million in 2012) have kept the company unprofitable. The last biochemicals-related company to go public, Ceres (NASDAQ:CERE), has fallen 77% since its February 2012 IPO. The fourth new deal was a small $20 million offering from UBIC (UBIC), a provider of Asian-language software-based eDiscovery services. Already listed in Japan (2158.JP), UBIC's platform has been used in more than 750 investigations in the US, Japan, South Korea, China and Singapore.

Seven IPOs added to the pipeline
Seven companies added $1.6 billion to the US IPO pipeline last week, the fourth in a row with at least six new filings. The four-week total of 27 is the highest since July-August 2011. There have been 15 new filings in April, the first year-over-year increase since February 2011. Of the 15, 11 generated less than $100 million in revenue over the last twelve months, and nine were unprofitable.

The largest new filing was from HD Supply, seeking $1 billion. The diversified industrial distribution company is backed by Bain Capital, The Carlyle Group (NASDAQ:CG) and Clayton, Dubilier & Rice, which together acquired an 88% stake from Home Depot (NYSE:HD) in an $8.5 billion LBO in 2007. Following fellow Californian homebuilder UCP (UCP), which filed for a $125 million IPO last week, William Lyon Homes (WLH) is looking to raise $200 million. Backers include Luxor Capital, which bought a large stake as part of Lyon's 2011 bankruptcy, Paulson & Co. and Colony Capital. UCP and William Lyon could be the third and fourth homebuilders to go public this year.

First NBC Bank (NBCB.RC), a full-service bank operating more than 30 branches in the New Orleans metropolitan area, filed to raise up to $115 million. It could be the third regional bank to go public in 2013, after Texas-based Independent Bank Group (NASDAQ:IBTX), up 11%) and New Jersey-based ConnectOne Bancorp (NASDAQ:CNOB), up 5%, and follows last week's filing from northeastern bank TriState Capital (TSC); $100 million deal size). Portola Pharmaceuticals (PTLA), which is developing therapeutics for blood clots, also filed to raise $115 million. Its lead candidate, Betrixaban, is in Phase 3 trials for the prevention of blood clots in acute medically ill patients.

ChannelAdvisor (ECOM), which provides software that helps its customers better manage their e-commerce sales across online channels such as eBay (EBAY - also an investor), Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN), filed for an $86 million IPO. Though not as fast-growing (23% in 2012) as last week's four new technology IPO filers, ChannelAdvisor has more than 1,900 customers, including Ann Taylor, Dell, Sony and Under Armour. It is backed by Kodiak Venture Partners, New Enterprise Associates and Advanced Technology Ventures.

The week's two smaller filings came from protein therapeutics company Kamada (KMDA; $69 million deal size), which is already listed in Israel (KMDA.IT), and Liquid Holdings Group (LIQD; $49 million), which provides software to integrate trading, real-time risk management, accounting, reporting and administrative tools for financial services companies. Liquid was formed in 2012 and generated $2 million in sales.

US IPO performance update
Despite strong gains from Chimerix and Rally, IPO returns stayed mostly flat last week. For 2013's 38 IPOs, the average return is 17% (equal to last week), and the average aftermarket return is 4% (up from 3%). Total proceeds, at $9.2 billion, could easily surpass $10 billion this week, with $1.9 billion in deals scheduled.