US Foods Prices IPO at $23 a Share
26 May 2016 - 11:00AM
Dow Jones News
US Foods Holding Corp. sold shares Wednesday at the upper end of
the targeted range for its initial public offering, in a sign the
new-issue market could be gradually returning to health.
The food-distribution company, owned by private-equity firms
Clayton Dubilier & Rice LLC and KKR & Co., sold shares
after the market closed at $23 apiece, raising $1.02 billion,
according to a person familiar with the matter. That makes it the
second-biggest IPO in a lackluster year for public debuts.
US Foods had targeted a per-share price of between $21 and
$24.
The offering values US Foods, which recently tried in vain to
sell itself, at just over $5 billion, including a possible
underwriters' allotment for shares. Nine years ago, the buyout
firms paid just over $7 billion for the company.
After previously paying themselves a big dividend, paying off
debt and boosting revenue, the buyout firms have roughly doubled
their investment on paper, according to two people familiar with
the matter.
The pace of IPOs in 2016 has been the slowest since 2009, partly
because of wild stock-market swings at the start of the year and
questions about the lofty valuations of many private technology
companies.
Ahead of the IPO of US Foods and four other offerings scheduled
for Wednesday, only 29 companies went public in the U.S., raising
$5.4 billion, according to Dealogic. That represents a
dollar-volume decline of more than 60% from this time last
year.
The pace has picked up recently. Seven companies in total are
set to go public this week, which would make it the busiest week
for IPOs since July. Still, the pace is expected to remain far
below recent years' levels, according to market participants.
Mark Hantho, global head of equity capital markets at Deutsche
Bank AG, called the recent uptick encouraging, but cautioned:
"We're not going to see a stampede of companies coming to
market."
The US Foods IPO is now second to that of MGM Growth Properties
LLC, a real-estate investment trust that raised $1.21 billion in
its April offering.
Few of the companies debuting this year have been the type of
big, recognizable names that typically characterize a robust
market. Four have been blank-check, shell companies, which
typically use IPO proceeds to acquire assets. And 12 have been
small biotechnology companies, which typically haven't yet
generated profits—or even sales in some cases.
Many of the companies that have braved the market have faced
pushback from investors. So far this year, ahead of the Wednesday
offerings, no IPO has priced above its expected range, and eight of
the U.S.-listed deals have priced below, according to Dealogic. Yet
on average, companies that have gone public closed up 4% on the
first day of trading and currently are even further into positive
territory.
The private-equity firms bought US Foods from Dutch supermarket
chain Ahold NV at the height of the leveraged-buyout boom. In late
2013, US Foods announced a $3.5 billion sale to rival Sysco Corp.
But that deal was called off last year after a federal judge ruled
against it on anticompetitive grounds.
Write to Maureen Farrell at maureen.farrell@wsj.com and Corrie
Driebusch at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
May 25, 2016 20:45 ET (00:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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