Motivated sellers helped close out a busy June calendar with a raft of deals in marketing hitting bids even if they were well below initial filing ranges. In the last three days of June we had 11 deals price to bring the June total to 19. There will be full details in the upcoming IPO Candygram but we’ve added the roadshow slides to the archive and provide a brief overview of the companies.
The Deal Rush by Size
HD Supply (HDS) provides building materials to the commercial construction industry. They were originally part of Home Depot and sold to private equity firms in 2007 for $8.5B which was another “revised down” deal from the original $10B offer price. This time HDS priced at $18 versus their proposed range of $22-$25. The shares dis rise slightly to close just below $19. The company will have $190M shares outstanding with a market cap of $3.6B.
CDW (CDW) is another private equity sponsored deal in the IT distribution space. The company was acquired by PE firms in 2007 for $7B. CDW has been trying to transform their business from pure distribution to offer more services and integration between products for their customers. Even so growth and margins are fairly limited and unlikely to see any great acceleration. The deal was scaled back and priced at $17, well-below the original $20-$23 filing range. The market cap of the company is $3B.
Noodles & Company (NDLS) is another “casual dining” restaurant offering a diverse menu which management feels put’s them in a “category of one” since they offer a “world menu” that includes noodles and pasta, soups, salads, sandwiches, and burgers. They are trying to position themselves as an “earlier stage Chipotle or Panera.” Noodles has 343 restaurants and is doing $300M in revenue with mid-teens growth. This deal was priced above the range at $18 and had a big gain in first day trading to $36. Using 30M shares that puts the market cap at just over $1B.
Tremor Video (TRMR) seems very similar to Brightcove (BCOV) which came public back in February 2012. That deal was a success initially but BCOV hasn’t rewarded long term investors so far. After pricing in the middle of the range at $11 the stock traded up to $16. This was followed by a series of declines all the way to $5 with some recent recover to $9. The Brightcove market cap is $250M or just under 3x sales versus TRMR which is now $450M in capitalization or 3.7x sales. Tremor is seeing improving revenue growth and nearing positive operating margins. Tremor Video priced at $10 and has traded off to just under $9 post-IPO. For investors wanting to “compare and contrast” the slide decks we include a link to Brightcove (BCOV) as well.
Prosensa (RNA) is using RNA-based methods to develop therapies for rare genetic diseases like Duchenne Muscular Dystrophy (DMD). They have a major collaboration with GlaxoSmithKline worth up to $650M around this potential new drug. Their platform has the potential to discover and commercialize additional therapies for other rare diseases. Prosensa priced at the top end of the range at $13 and has since settled into a $19 share price and a market cap just shy of $650M.
Esperion Therapeautics (ESPR) raised funds for the completion of Phase 2 clinical trials for their lead drug candidate, ETC-1002, which would be used to lower LDL-C levels in the bloodstream (as an alternative to statins). Elevated levels of LDL-C are linked to cardio vascular diseases. There will be some news items in Q3 and Q4 of 2013 with final Phase 2B results due at the end of 2014. The shares were priced in the middle of the range at $14 and traded up briefly before settling back to $14 for a market cap of just over $200M.
Nanostring Technologies (NSTG) sells a product allowing researchers to carry out their own genomic testing. In the past, complex genomic tests have been services offered only by a limited number of specialized laboratories. Nanostring’s main objective in raising capital is to commercialize Prosignia, its first molecular diagnostic product. Prosignia provides a breast cancer patient and her physician with a subtype classification based on a test of tissue from the patient’s tumor, as well as a prognostic score quantifying the probability of the cancer returning in the next 10 years. Prosignia is not yet approved by the FDA for use in the US which creates some material risk. The IPO was priced below the $13-15 filing range at $10 and traded down to just above $8 for a market cap of just $117M.
Luxoft (LXFT) is an IT development services company based out of Eastern Europe (Ukraine, Russia, Romania and Poland) with large clients including Deutsche Bank, UBS, Boeing, Harman and Avaya. The company has been growing and moving “upstream” toward higher value projects. The company is earning about $40M on $300M in revenue. The $17 IPO price was the mid-point of the range and the shared have enjoyed some post-IPO lift to $20 putting the market cap just over $650M.
Aratana Therapeutics (PETX) is one of the more interesting IPO deals this season for it’s a “aspirational story” about applying the biotechnology used for developing human therapies to creating drugs for pets. Normally a deal like this would be private rather than public. The company has three drugs in the portfolio but they won’t be approved until 2016. At the same time the company is pioneering a new type of model and will be building their own distribution as well. Investors were intrigued enough to get the deal done but well below the $11 to $13 filing range at $6/share. The low price did help attract some aftermarket buying and the shares settled in at $7.50. With about 20M shares out that puts the market cap at $150M. This is going to be one to watch, especially in several months as lockup shares come out. For contrast investors might consider looking at Zoetis (ZTS) which is the leader in the industry with well over $4B in annual sales and a $15B market capitalization. Zoetis came public in January of this year and for comparison purposes the roadshow slides are provided via this link Zoetis (ZTS).
Also priced recently were MedWorth Acquisition Crop (MWRX) and Silvercrest Asset Management (SAMG) but since they didn’t do public IPO roadshow presentations we do not have them in the archive.
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