Failing to recapture the enthusiasm for organic food plays that propelled Annie's (BNNY) and Natural Grocer's (NGVC) earlier this year, WhiteWave Foods (WWAV) had a weak debut during another active week for US IPOs. WhiteWave, a dairy and dairy-alternatives carveout of Dean Foods, priced a dollar above the proposed range and offered an extra 3 million shares, both signs of strong demand; however, it retreated on Friday (-1%), becoming the fifth US IPO in October to post a negative first-day return. At the offer price, WhiteWave was valued at a multiple above most of its key peers, which may have been a reflection of the inherent conflict of its parent trying to maximize the price (all of the IPO proceeds went directly into the pocket of its parent Dean Foods). Had the company priced at the midpoint, the closing price of $16.75 would have reflected a 12% return – squarely in-line with historical averages.
MPLX produces another strong energy LP debut
Friday was kinder to MPLX (MPLX), a midstream LP formed by Marathon Petroleum (NYSE: MPC), which gained 24% in its first day of trading. Although it too priced aggressively, at a dollar above the range with extra shares, it managed to continue the success of midstream LP IPOs, which have attracted investors with high expected dividend yields. Another LP, Lehigh Gas Partners (LGP), which distributes motor fuels and leases gas stations, had a more modest debut, trading up 4% after pricing at the midpoint. Compared to MPLX, Lehigh lacked a public parent, had less certain growth and carried more debt.
Seven companies launch or set terms
Last week, two more LPs were added to the calendar: Southcross Energy Partners (SXE), which holds natural gas midstream assets, and Delek Logistics Partners (DKL), which owns crude oil and refined products logistics assets, set terms for $180 million and $160 million IPOs, respectively.
On Tuesday, high end home furnishings retailer Restoration Hardware (RH) and cardiovascular diagnostics company Singulex (SGLX) announced terms, looking to raise $119 million and $70 million, respectively. Both IPOs are scheduled to price during the week of October 29.
Silvercrest Asset Management (SAMG), a small financial advisory firm that manages $10.7 billion on behalf of ultra-high net work individuals and institutional investors, set terms for a $55 million IPO. Taylor & Martin Group (TMG), a rollup of auction marketplaces and reverse logistics companies, and Energy & Exploration Partners (ENXP), an oil and gas E&P, both set pricing dates after previously announcing terms. If all seven deals currently on the US IPO calendar price, 2012 will have had 125 pricings, tied with 2011's full-year total.
Bain Capital-backed Bright Horizons added to the pipeline
Two companies were added to the US IPO pipeline this week. Bright Horizons Family Solutions (BFAM), which provides work site child care and was publicly traded for 10 years until it was acquired by Bain Capital for $1.3 billion, filed for a $220 million IPO. For the 12 months ended June, the company generated just over $1 billion in revenue and adjusted EBITDA of $162 million.
Orchid Island Capital (ORC), a REIT focused on agency RMBS, filed for a $45 million IPO. The pipeline now holds 129 companies looking to raise $38.8 billion, with 52 companies having released updates within the past 90 days.
US IPO performance update
Although IPO activity has picked up in October, performance for US IPOs has slipped recently, which is not a surprise given the sell-off seen in the broader markets in response to signs of ongoing global macroeconomic challenges and an uninspiring corporate earnings season. Five of the last seven IPOs have gained less than 10%. IPOs that priced over the last 90 days have produced an average return of 17%, down from 20% last week. The average aftermarket return – or the average gain from an IPO’s first day close – now stands at 4%, half of last week’s figure. Of the 34 deals, more than a quarter (26%) are trading below their offer prices, compared with 16% last week.