Third Time's the Charm for Talecris IPO?

Will Talecris Biotherapeutics be the first healthcare group to test the temperature of the IPO waters since the credit crunch put paid any hopes that investors in private companies had of receiving an exit via a public listing?

Over the past 18 months these waters have been close to freezing but according to some investors they are showing signs of warming up. News that Talecris recently re-filed their IPO prospectus with the SEC suggests the company’s private equity investors could revert to plan A for an exit, following the failure of plan B when CSL’s $3.1bn takeover bid collapsed, a move previously highlighted by EP Vantage (CSL’s reality check sinks Talecris deal, June 9, 2009).

Struggling for an exit

Talecris was established in 2005 when private equity groups Cerberus Capital and Ampersand Ventures acquired Bayer’s plasma products business for $300m. Cerberus is the dominant shareholder, currently owning around 75% of Talecris’ shares.

Both sets of investors subsequently sought an exit in July 2007 when the company filed for an IPO, which would have been one of the biggest in the industry in recent years with an estimated value of $1bn.

However, the downturn in stock markets put paid to these best laid plans and the company put itself up for sale, resulting in CSL’s bid last year. CSL’s $3.1bn offer valued Talecris’ equity at $1.9bn with the remaining $1.2bn covering the group’s debt.

Talecris was left ruing its run of bad luck last month when the US Federal Trade Commission objected to CSL’s planned acquisition of the company, mainly on anti-competitive grounds that a CSL-Talecris tie up would be a consolidation step too far for the blood plasma sector and ultimately lead to collusion between the remaining players.

Whilst other potential suitors to fill CSL’s shoes may exist and could yet be brought to the table, the voracity of the FTC’s objections may well have put serious doubts into the minds of these prospective partners. Clearly, only a company with minimal or no current involvement in the field would be acceptable to the FTC, but persuading such a partner to make the plunge in this most specialist of sectors would be a tough ask.

IPO for the right candidate

Although IPOs for risky biotechs with unproven technologies or products and lacking a consistent revenue stream is not a viable option right now, there is an increasing sense that a public offering may be possible for a company with solid and sustainable revenues and earnings.

With revenues of $1.4bn last year, realising a profit of $66m, and an average annual income of $125m over the past four years, Talecris would certainly fit this bill. Despite these decent profits, this has never consistently translated into a significant cash reserve with which the company could grow the business further. As of the end of March Talecris held $12.6m in cash, although this will have been swelled significantly by the $75m break-up fee Talecris received from CSL.

As if to emphasise the point that an IPO may be possible for the right company, private Danish group Nycomed, another company with healthy revenues and profits, has strongly hinted that an IPO could be possible by the end of the year.

Talecris and Nycomed could therefore provide the first real indicator of how much these IPO waters have warmed up. Meanwhile Talecris’ investors will be hoping it will be third time lucky in their quest for an exit.