IPO Preview: GSE Holding

| About: GSE Holding (GSE)

Based in Houston, Texas, GSE Holding (proposed GSE) scheduled a $63 million IPO with a market capitalization of $165 million at a price range mid-point of $9 for Friday, February 10, 2012.

GSE is one of nine IPOs scheduled for this week (see our IPO calendar).


Makes plastic membrane covers for garbage, mining, etc sites. GSE's been losing money from 2008 through 2010, and in 2011 made a small profit of $1.9 million while paying $15 million in interest.

This is a leverage buyout retry at a lower valuation than the first part of December, when failed to go public.


At the current price range mid-point the price/earnings multiple for the year ended December 2011 is 65, which is very steep for the plastic membrane business.


GSE makes synthetic linings for hillsides, solid waste containment, oil containment, concrete protection, etc.


A&M (market research) estimates that the market for geosynthetics used in environmental containment applications will be approximately $1.7 billion in 2011, and is expected to grow at an annual rate of 7% to approximately $2.2 billion by 2015.

According to A&M, GSE is the largest market participant with 24% global geomembrane market share, and we is the market leader in several key markets and geographies, as shown by a 40% market share in the mining end market, a 19% market share in the waste management end market, and a 11% market share in the liquid containment end market.

Our industry is highly fragmented due to its relevance to a wide variety of products, applications, end markets and geographies. For the most part, other market participants are small, privately held companies that compete on a local or regional basis and offer only one or a few products. Globally,


GSE serves leading mining, waste management and power companies; independent installers and dealers; general contractors and government agencies.

GSE solutions have been integral components of projects by large, well-established and well-known companies such as Arizona Public Service Company, Inc., Barrick Gold (NYSE:ABX), BHP Billiton plc (NYSE:BHP), the Charoen Pokphand Group Co. Ltd. (OTCPK:CHPFF), Newmont Mining (NYSE:NEM), Rio Tinto (NYSE:RIO), Veolia Environnement (VE) and Waste Management (NYSE:WM)


CHS Capital™ is a Chicago-based private equity firm with 23 years of experience investing in the middle market. CHS targeted well-managed companies with enterprise values between $75 - $500 million,


GSE has received patents from the U.S. Patent and Trademark Office. Some of these patents have been issued in select foreign countries and certain patent applications are being prosecuted in such jurisdictions


The geosynthetics industry is relatively fragmented due to the wide variety of products, functions, markets and geographies. GSE is one of the few companies that offer multiple types of geosynthetic products.

GSE estimates that over 150 companies produce geosynthetics and that there are 30 companies that compete in the production of geomembranes, which is GSE's largest product type.

GSE's primary in North America and Europe is Agru Kunststofftechnik GmbH, or Agru, a family-owned company based in Austria, which focuses primarily on piping systems. This company's American affiliate, Agru America, produces geomembranes and other geosynthetics primarily for lining applications to protect against leaching wastes and fluids from reservoirs. Agru has facilities in Austria, Germany and the United States.

In less developed regions of the world, the competitive landscape is more fragmented than in the United States and European markets. Many competitors in these developing regions are low-cost geosynthetic manufacturers that lack the product quality and consistency to compete in more mature markets. As international regulations become increasingly stringent, greater importance will be placed on manufacturers such as us that have the technical expertise and industry certifications required to supply geosynthetic products that comply with these regulations.


GSE expects to net $57 million which is allocated as follows:

  • $20 million to repay debt
  • Pay a one-time fee of $3.0 million to Code Hennessy & Simmons IV LP, in consideration for the termination of the management agreement between GSE and CHS IV; and the
  • Balance for working capital and general corporate purposes.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.