U.S. IPO Recap: Twitter Tweets Its Plans While 11 Others Set Terms

by: Renaissance Capital IPO Research

Twitter stole the headlines with its confidential filing, but the US IPO market saw plenty of major public filings last week. Rapidly growing security software company FireEye (NASDAQ:FEYE) was one of eleven deals to set terms, pushing the September calendar past 20 deals, and Hilton and ARAMARK, both the objects of huge pre-recession LBOs, were two of seven to make initial filings. The lone pricing of the week, OCI Resources LP (OCIR), struggled on its first day of trading on Friday.

Soda ash producer OCI falls in first September IPO

OCI Resources LP, the North American soda ash production business of Korea's OCI Chemical, raised $95 million after pricing at the low end of its price range. It fell 5% on its first day of trading last Friday. Although the proposed yield was a relatively high 10.5%, trading was likely impacted by volatile soda ash prices, which dropped 11% in the first half, and falling demand from glassmakers.

IPO pricings (week of September 9, 2013)
Company (Ticker) Business Deal Size ($mm) Price vs. Midpoint Return
OCI Resources LP (OCIR) Soda ash production $95 -5% -5%

FireEye, growing 108%, launches $182 million IPO

FireEye set terms for a hotly anticipated technology IPO early last week. Revenue from its IT security appliances and software subscriptions ($160 million LTM) more than doubled in the second quarter, as it has in each of the past three years. Losses have been heavy, however; sales and marketing expenses alone were 113% of revenue in the second quarter.

ClubCorp (NYSE:MYCC), which operates 152 clubs (mostly golf and country clubs) with 360,000 members, set terms for a $306 million deal. KSL Capital Partners acquired the company for $1.8 billion in 2006. Covisint (NASDAQ:COVS), a spinoff of Compuware, set terms for a $64 million IPO. A consortium of automakers formed the company in 2000. General Motors, the largest customer of its data sharing software, accounts for 27% of sales.

IPOs setting terms (week of September 9, 2013)
Company (Ticker) Business Deal Size ($mm) LTM Sales ($mm)
Pattern Energy Group (NASDAQ:PEGI) Wind power projects $320 $154
ClubCorp Holdings (MYCC) Golf, country and other clubs $306 $770
FireEye (FEYE) Enterprise security software $182 $115
Rocket Fuel (NASDAQ:FUEL) Automated digital ad buying $102 $160
Ophthotech (NASDAQ:OPHT) Eye disease biotech $100 $0
Montage Technology (NASDAQ:MONT) Set-top box chips $92 $90
RingCentral (NYSE:RNG) Cloud-based phone systems $90 $136
Foundation Medicine (NASDAQ:FMI) Cancer diagnostics $75 $20
Covisint (COVS) Data sharing platform $64 $94
Applied Optoelectronics (NASDAQ:AAOI) Fiber-optic networking products $50 $69
Pioneer Power Solutions (NASDAQ:PPSI) Electrical equipment/services $8 $86

Seven initial filers include Hilton, ARAMARK

Seven companies submitted initial filings last week, including Blackstone-backed Hilton Worldwide and commercial food, facilities and uniform services company ARAMARK, both of which were taken private at the peak of the LBO boom in 2007. Hilton Worldwide, which owns and franchises a portfolio of 4,041 hotels worldwide, filed for a $1.25 billion offering, which would make it the third largest IPO of 2013, behind Zoetis ($2.2 billion) and ING U.S. ($1.3 billion). The company was previously traded on the NYSE under the ticker HLT until it was acquired by Blackstone in a $26 billion LBO.

ARAMARK filed with a $100 million deal size, but that amount is likely just a placeholder. We estimate the deal could raise $700 million or more. The company operates in 22 countries in North America, Europe, Asia and South America and provides services to business and industry (41% of 2012 sales), education (26%), health care (17%), sports and leisure (12%) and corrections (4%) clients. Approximately 84% of the Fortune 500 are ARAMARK clients. The company previously traded on the NYSE under the ticker RMK until it was taken private by then-CEO Joseph Neubauer and a group of private equity investors for $6.3 billion.

Last week's initial filers also included three technology companies, SunEdison Semiconductor (WFR), a spinoff of SunEdison's (formerly MEMC) silicon wafer division, Veeva Systems (NYSE:VEEV), which provides sales and marketing management SaaS to life sciences companies, and Endurance International (NASDAQ:EIGI), a web hosting and domain services provider. SunEdison announced in late August that it plans to spin off its semiconductor division in order to raise capital to fund its solar business. Veeva Systems' cloud-based software for health care companies allows them to track drug information and to increase the productivity of sales and marketing teams; customers include Bayer (OTCPK:BAYRY), Boehringer, Eli Lilly (NYSE:LLY), Gilead (NASDAQ:GILD), Merck (NYSE:MRK) and Novartis (NYSE:NVS). Endurance International serves 3.4 million subscribers and was acquired by Goldman Sachs and Warburg Pincus for $975 million in November 2011.

New IPO filers (week of September 9, 2013)
Company (Ticker) Business Deal Size ($mm) LTM Sales ($mm)
Hilton Worldwide (HWW.RC) Global hotel chain $1,250 $9,398
ARAMARK Holdings (RMK.RC) Commercial food services $700* $13,831
Endurance International (EIGI) Web hosting and domain services $400 $451
SunEdison Semiconductor (WFR) Silicon wafers $250 $953
Veeva Systems (VEEV) Life sciences SaaS $150 $168
GeoPark (NYSE:GPRK) South American E&P $100 $289
Tri-County Financial (NASDAQ:TCFC) Commercial bank $31 $31

*Renaissance Capital's estimate.

IPO market snapshot

The 132 IPOs in 2013 have raised $28.6 billion and produced an average return of 34%. There have been 53 IPOs in the past 90 days, with total proceeds of $10.3 billion and an average return of 28%. The active IPO pipeline includes 118 companies looking to raise $33.8 billion.