U.S. IPO Recap: Hilton And 11 Others Set Terms

by: Renaissance Capital IPO Research

Setting the stage for a potentially record-breaking week in the US IPO market, twelve companies set terms last week. The largest of these were Hilton Worldwide (NYSE:HLT), the world's largest hotel chain, and ARAMARK (NYSE:ARMK), the third-largest provider of food and facilities management and uniform services, which launched $2.2 billion and $779 million deals, respectively. Xencor (NASDAQ:XNCR), which postponed its IPO in November, completed the 210th IPO of 2013 and gained 41% after pricing far below its initial range. With 2013 just seven IPOs short of 2004's post-tech bubble record of 217, ten IPOs are scheduled for the coming week.

Xencor performs well after cutting valuation

Xencor, which is developing antibodies for severe autoimmune/allergic diseases and cancer, set terms for and priced a $70 million offering at $5.50 per share in last week's only IPO. The company had first planned to price at $14 to $16, but, despite cutting its proposed price to $7, was one of six biotechs to postpone IPOs last month. Although Xencor has a deep pipeline of drug candidates and potentially lucrative agreements with Amgen, MorphoSys and Merck, it faced resistance over its early stage of development and need for additional funding prior to commercialization. The stock jumped 52% on its first day of trading and ended the week near $8, still far below its original price range.

IPO pricings (week of December 2, 2013)
Company (Ticker) Business Deal Size ($mm) IPO Price vs. Midpoint Return as of 12/6
Xencor (XNCR) Autoimmune disease treatments $70 -63% 41%

Twelve companies set terms

In a rush to complete deals before the end of the year, a group of 12 companies added nearly $5 billion to the IPO calendar last week. Accounting for almost half of these proceeds, Hilton Worldwide set terms for what could be the third largest IPO of 2013. Acquired by Blackstone for $26 billion in 2007, Hilton has shifted to a fee-based franchising and management model, helping it to reclaim its status as the world's largest hotel chain and to build the industry's largest development pipeline. ARAMARK, which was LBO'd by Warburg Pincus, Goldman Sachs and others for $8 billion in 2007, set terms for last week’s second biggest new deal. It serves 86% of the Fortune 500 and targets a $900 billion market for food and facilities management and uniform services.

AMC Entertainment (NYSE:AMC), a U.S. movie theater chain, launched a $350 million IPO. It has filed to go public twice before and was most recently acquired by the Wanda Group for $3 billion in 2012. A fourth recently acquired company, Fidelity & Guaranty Life (NYSE:FGL), set terms for a $176 million IPO. Bought by the Harbinger Group (NYSE:HRG) in 2011, the life insurance provider has 700,000 policyholders and a $16 billion investment portfolio.

Coming off 130% sales growth in the third quarter, Nimble Storage (NYSE:NMBL) announced terms for a $136 million IPO. It offers hybrid flash/disk storage arrays mostly to mid-sized enterprises and is backed by Accel Partners, Sequoia Capital and Lightspeed Venture Partners. Another fast-growing technology company, Autohome (NYSE:ATHM) is on the calendar for this week after setting terms during the week of Thanksgiving. The Chinese auto information site has had 63% revenue growth year-to-date and has nearly 6 million daily users.

Two energy LPs set terms for large IPOs. Cheniere Energy Partners (NYSEMKT:CQH), seeking $600 million, will own a 56% LP interest in Cheniere Partners (NYSEMKT:CQP), and Valero Energy Partners (NYSE:VLP), seeking $300 million, will receive pipeline and logistics assets from Valero (NYSE:VLO), the world's largest independent refiner. A pair of healthcare companies launched much smaller deals. Kindred Biosciences (NASDAQ:KIN), formed in 2012, is developing pet therapeutics, and Semler Scientific (NASDAQ:SMLR) sells devices that measure arterial blood flow.

The last IPO added to the calendar was a $151 million offering from Scorpio Bulkers (NYSE:SALT), a recently formed drybulk shipping company. DTLR Holding (Pending:DTLR), a street-inspired footwear, apparel and accessories retailer, also set terms last week, but it announced a withdrawal on Friday, citing an undisclosed business development.

IPOs setting terms (week of December 2, 2013)
Company (Ticker) Business Deal Size ($mm) LTM Sales ($mm)
Hilton Worldwide (HLT) World's largest hotel chain $2,200 $6,251
ARAMARK Holdings (ARMK) Food and facilities services $779 $13,946
Cheniere Energy Partners LP Holdings (CQH) Cheniere Partners interests $600 $269
AMC Entertainment (AMC) Movie theaters $350 $2,733
Valero Energy Partners (VLP) Pipeline and logistics assets $300 $91
Fidelity & Guaranty Life (FGL) Life insurance $176 $1,346
Scorpio Bulkers (SALT) Drybulk shipping $151 $0
Nimble Storage (NMBL) Storage arrays $136 $104
DTLR Holding (DTLR) Street-inspired apparel $75 $190
Xencor (XNCR) Autoimmune disease treatments $70 $11
Kindred Biosciences (KIN) Pet therapeutics $40 $0
Semler Scientific (SMLR) Blood flow measurement $15 $2

Surgical laser provider Lumenis files for $115 million IPO

Lumenis (NASDAQ:LMNS), which develops and sells lasers used in minimally invasive surgical procedures, was the only company added to the IPO pipeline last week, filing for a $115 million IPO. The Israeli company booked $261 million in sales for the 12 months ended September 30, 2013.

New IPO filers (week of December 2, 2013)
Company (Ticker) Business Deal Size ($mm) LTM Sales ($mm)
Lumenis (LMNS) Lasers used in minimally invasive surgical procedures $115 $261

IPO market snapshot

The 210 IPOs in 2013 have raised $49.4 billion and have produced an average return of 32%. The IPO Index, which is tracked by the Renaissance IPO ETF (symbol IPO), is up 51% this year. There have been 79 IPOs in the past 90 days, with total proceeds of $20.9 billion and an average return of 33%. The active IPO pipeline includes 93 companies looking to raise a total of $29.1 billion.