The successful IPOs of Fairway Group (FWM), Blackhawk Network (HAWK) and SeaWorld Entertainment (SEAS) served as positive bookends to a mixed week in the US IPO market. For the second week in a row, six IPOs priced, but Thursday's three deals from Taminco (TAM), Intelsat (I) and Hannon Armstrong (HASI) all raised much less than expected and produced lackluster returns. ING U.S.'s (VOYA) planned $1.4 billion IPO was the most prominent of four deals added to the IPO calendar. The week also saw four new filings, which included a $5.4 billion deal from Brazil's Votorantim Cimentos (VOTO.RC) and the first filing from China since YY (YY) in October 2012.
New York City grocer Fairway Group jumps 33%
Fairway Group, which operates 12 large-format grocery stores in the greater NYC metro area, raised $177 million by offering 13.7 million shares at $13, above the $10 to $12 range. Fairway soared 33% on its first day, the fourth best debut of 2013 after Xoom (59%), ExOne (47%) and Chimerix (34%). The Sterling Investment Partners-backed company is the first retail IPO of the year and is one of only four public high-growth supermarket chains (the others are Whole Foods (WFM), The Fresh Market (TFM) and National Grocers by Vitamin Cottage (NGVC), all of which are capitalizing on increasing consumer interest in specialty and organic foods. The last supermarket IPO, National Grocers by Vitamin Cottage, has traded up 60% since its July 2012 debut. Fairway has more than doubled its store count in the last three years, but its narrow geographic focus has led to cannibalization, resulting in negative comp store sales.
Blackstone-backed SeaWorld upsizes deal, gains 20%
A second consumer-focused IPO (and just the fourth of the year), from SeaWorld Entertainment, raised $702 million. The U.S. theme park operator had planned to raise $510 million before Blackstone (BX), which acquired the company for $2.3 billion in 2009, announced additional selling on Thursday. With funds from the acquisition, SeaWorld has invested heavily in upgrades to its parks and revived top-line growth to 11% in 2011 and 7% in 2012. It is now the third publicly traded theme park operator in the U.S., after Six Flags (SIX) and Cedar Fair (FUN), both of which are up more than 30% over the past year. After SeaWorld's 24% first-day gain, all four 2013 consumer IPOs are up 20% or more.
Gift card distributor Blackhawk raises $230 million
Blackhawk Network, a distributor of prepaid gift, telecom and debit cards, took in $230 million for parent company Safeway by pricing 10 million shares at $23, above the $20 to $22 range. Despite recent increases in the fees paid to retail partners (up 190 bps in the 1Q13), Blackhawk's strong revenue growth (28% in 2012) and favorable industry forecasts drew a positive reception. The stock finished Friday at $26, up 23%.
Deep price discounting for Thursday's three deals
Three IPOs began trading on Thursday, all at deeply discounted offer prices. Taminco and Intelsat priced $3 below their ranges, while Hannon Armstrong priced 17% below its proposed midpoint. Taminco, the world’s largest pure-play producer of alkylamines and alkylamine derivatives, completed a $237 million IPO by pricing 16 million shares at $15. In spite of its strong margin profile, Taminco’s lack of a dividend and the poor recent performance by chemicals companies likely held back the stock, which fell 3%.
Intelsat, the top global provider of satellite services, raised $348 million by pricing its downsized deal of 19 million shares at $18. Intelsat planned to use the proceeds along with $150 million from a concurrent convertible preferred offering to pay down some of its massive $15.9 billion debt load. The last IPO with a comparable debt overhang, Caesars (CZR), priced at $9 in February 2012 and has traded as high as $17.60 and as low as $4.80. Intelsat finished the week up 10%.
Hannon Armstrong, a REIT that provides financing for clean energy and other infrastructure projects, priced at $12.50. The company's gross proceeds of $167 million were 17% below the $200 million originally planned. Hannon Armstrong is in the process of broadening its client base beyond government entities and increasingly retaining loans on its balance sheet rather than securitizing them. Worries about execution, combined with government budgetary concerns, likely contributed to the stock's 9% drop.
ING U.S. launches year's second billion dollar deal
ING U.S., the American unit of premier retirement, investment and insurance company ING, plans to raise $1.4 billion in what would be the largest deal since Zoetis' (ZTS) $2.2 billion IPO in January. The company, which competes with Lincoln, MetLife and Prudential, is expected to rebrand as Voya Financial upon completion of the offering. As a condition for aid, ING Group agreed to divest 25% of its holding in ING U.S. by the end of 2013, 50% by the end of 2014 and 100% by the end of 2016.
Three IPOs added to the calendar
Payment processor QIWI announced terms for a $204 million IPO. Although Russia is still predominantly cash-based (94% of transaction volume in 2011), QIWI's virtual wallet and network of online kiosks pushed revenue up 28% to $136 million in 2012. Cannibinoid therapeutics company GW Pharmaceuticals (GWPH) set terms for a $38 million IPO. The stock currently trades on the AIM in London under the symbol "GWP." Insys Therapeutics, a specialty pharma that has launched two products to treat breakthrough cancer pain and chemotherapy-induced nausea and vomiting, announced terms for a $68 million offering. The company booked $15 million in revenue in 2012.
Brazilian cement producer files for $5.4 billion IPO
Votorantim Cimentos (VOTO.RC), Brazil's largest cement producer, filed on Wednesday to raise up to $5.4 billion. Founded in 1933, Votorantim Cimentos SA is the 8th-largest cement producer globally based on production capacity, with operations in the Americas, Europe, Africa and Asia. The São Paulo-based company booked $4.6 billion in sales in 2012, an increase of 9% over 2011. The company is owned by the Ermirio de Moraes family, which helped build Latin American industrial conglomerate The Votorantim Group. The Votorantim Group has operations in metals, power generation, chemicals, pulp and paper, and orange juice, with consolidated net revenue of $12.1 billion.
First Chinese filer of 2013
LightInTheBox (LITB), a global online retail company that offers a selection of lifestyle products, filed for an $86 million IPO. LightInTheBox could be the first Chinese company to list in the U.S. since YY (YY) debuted in November 2012. YY is up 55% since its IPO. The only other 2012 US IPO from China, Vipshop (VIPS), is up 341% since its February listing, making it the best-performing IPO in the last two years. LightInTheBox, based in Beijing, was founded in 2007 and booked $200 million in sales in 2012.
Epizyme files for a $69 million IPO
Epizyme (EPZM), a biotech developing therapeutics for patients with genetically defined cancers, filed to raise up to $69 million. Collaborations with Celgene, Eisai and GlaxoSmithKline have brought in $120 million in milestone payments to date, with $1 billion or more still available, and could generate royalties from the mid-single to mid-double digits. Primary backers include venture firms New Enterprise Associates (25% pre-IPO stake) and Kleiner, Perkins, Caufield & Byers (20%).
Silvercrest refiles for a $60 million IPO after withdrawing in late 2012
Silvercrest Asset Management Group (SAMG), an ultra high net worth individual-focused investment company with $11 billion in AUM, filed on Friday with the SEC to raise up to $60 million. Silvercrest Asset Management Group initially filed in September 2012, set terms for a $55 million IPO in October and withdrew in November. Vulcan Capital, which was founded by Paul Allen, purchased a 30% stake in the company in 2007.
Silvercrest was the 19th new filer in April, making April the most active month for IPO filings since August 2011, when 24 companies filed.
IPO performance update
The mixed performance of last week's deals and increased volatility in the broader markets took a slight toll on recent IPO performance. The average return for the year's 44 IPOs is 16% (vs. 17% last week), and the average aftermarket return is 3% (vs. 5%). Total proceeds for the year are $11.1 billion, up 23% from this time last year.