The past seven days have seen 13 new deals added to the IPO calendar, including 4 large private equity-backed companies and yet another round of biotechs (6 in total). Not a single tech deal launched, but IPO investors will see the first high growth restaurant chain in three months with El Pollo Loco (LOCO).The Renaissance IPO ETF (symbol: IPO) gained nearly 8% in June, and a rebound in IPO valuations has spurred a flurry of new offerings. For the 146 companies in the bulging IPO pipeline looking to raise $53 billion, the IPO ETF's decline since July 1st could reflect a closing window of opportunity and provide additional motivation to go public, especially before IPO market activity shuts down for its seasonal late August hiatus.
Two large industrial LBOs set pricing terms
Orion Engineered Carbons (OEC), a European producer of a carbon-based chemical used in inks, polymers and industrial rubber, set terms to raise $405 million for selling shareholders next week. The company was LBO'd in 2011 when Rhone Group and Triton Advisers bought it from the German chemical giant Evonik for over $1.2 billion. Orion now comes to market with an enterprise value of $1.7 billion.
Advanced Drainage Systems (WMS) filed to raise $261 million next week, $167 million of which should go to PE backer American Securities. It is the world's largest producer of industrial high density plastic pipe, and stands to benefit from an improving domestic real estate market. Advanced Drainage will go public after being a PE portfolio company for 26 years, including 22 years held by Berkshire Partners. Both Orion and Advanced Drainage report sales over $1 billion and positive cash flow margins.
A bankruptcy comeback and a high-growth crazy chicken restaurant
Oaktree Capital now hopes what Freddie Mercury once crooned: "Radio, someone still loves you!" Townsquare Media (TSQ), the country's third largest owner of radio stations with 312 mainly in small and mid-sized markets, plans to raise $125 million next week. Formerly Regent Communications, Oaktree bought a controlling interest after the company went bankrupt in 2010 and Townsquare has grown quickly by acquiring several mid market radio operators.
El Pollo Loco, a Tex-Mex chicken-focused restaurant chain in the western US, set terms for a $100 million IPO next week. Trimaran Capital, which invested $415 million in 2005, is no doubt hoping for comparisons between it and Chipotle or April IPO Zoe's Kitchen (ZOES).
Three of the seven health care IPO filers develop absorbable drugs
With record biotech issuance so far this year (39 have raised $2.6 billion), trends have included biotechs focused on pain, rare diseases, versions of existing drugs and, more recently, immunotherapy. However, the past week featured terms filings from three companies with drug-eluting products that are absorbed by the body. Innocoll (INNL) expects to raise $75 million next week to fund the development of collagen-based sponges that slowly relieve post-operative pain at the site of the wound and treat diabetic foot infections.
Also raising $75 million, Ocular Therapeutix (OCUL) develops eye therapies based on its sustained-release hydrogel platform. Intersect ENT (XENT) markets its product as a superior method of reducing inflammation after sinusitis surgery and the company is developing a non-surgical absorbable implant as well. Other health care IPOs include Atara Biotherapeutics (ATRA), which develops a drug to prevent muscle loss in patients with end-stage renal disease, and Immune Design (IMDZ), which is developing immunotherapy treatments for cancer. It is led by Carlos Paya, the former President of Elan. Vascular Biogenics (VBLX), an Israeli biotech developing gene therapy platforms for rare brain cancer and inflammatory diseases, set terms this morning to raise $76 million in two weeks.
Although small, Spark Energy's (SPKE) $60 million IPO is notable because it could be the year's first IPO from a utility company, a sector that has outperformed equity markets this year.
| IPO terms filings (July 9 through July 16) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Orion Engineered Carbons (OEC) | Makes a carbon chemical with industrial uses | $405 | $1,830 |
| Advanced Drainage Systems (WMS) | High density plastic pipe used in construction | $261 | $1,069 |
| Townsquare Media (TSQ) | Oaktree-backed operator of 312 radio stations | $125 | $294 |
| El Pollo Loco Holdings (LOCO) | Tex-Mex restaurants primarily in California | $100 | $319 |
| Vascular Biogenics (VBLX) |
Biotech: cancer/inflammation gene therapy | $76 | $0 |
| Innocoll (INNL) | Biotech: absorbable collagen for pain/infection | $75 | $5 |
| Ocular Therapeutix (OCUL) | Biotech: absorbable eye therapies | $75 | $0 |
| Atara Biotherapeutics (ATRA) | Biotech: prevents renal disease muscle loss | $75 | $0 |
| Immune Design (IMDZ) | Biotech: early-stage immuno-oncology | $60 | $1 |
| Intersect ENT (XENT) | Absorbable nasal implants for sinusitis | $60 | $23 |
| Spark Energy (SPKE) | Gas and electricity utility | $60 | $324 |
| Bio Blast Pharma (ORPN) | Biotech: platform for rare genetic diseases | $40 | $0 |
| GWG Holdings (GWGH) | Holds a portfolio of life insurance policies | $20 | $30 |
Mol Global could be first Malaysian company to list a US IPO in over a decade
Five new filers were added to the pipeline since last week's Pipeline Update. Mol Global (MOLG.RC) submitted an initial filing to raise $300 million on Monday, which could make it the first Malaysia-based company to list on a US exchange in over ten years. Owned by Malaysian billionaire Vincent Tan, the company operates an online payment platform primarily used for for online gaming credits, though Mol has invested in a suite of digital payment services. The company reported nearly 30% EBITDA margins on $53 million in sales in 2013 (which were up 80%).
Three health care companies filed for IPOs. The largest by deal size was the biotech. Otonomy (OTIC), which has raised nearly $150 million privately, filed to raise $86 million in its IPO as it develops gel-based therapies for ear diseases, and is backed by TPG, OrbiMed and Novo A/S, among others. The filing came just days after it reported the success of a Phase 3 trial. One of its competitors, Auris Medical (EARS), also filed for an $86 million IPO in late June.
American Addiction Centers (AAC) operates 6 inpatient substance abuse centers across the US, with plans to build or acquire four more. ReWalk Robotics (RWLK) filed to go public after receiving FDA approval in June for the company's exoskeleton device that enables paraplegics to walk, the first of its kind to receive approval for personal use. The Israel-based robotics maker plans to penetrate rehabilitation centers and later adapt its computer-based exoskeletons to fit the needs of patients affected by quadriplegia, multiple sclerosis, stroke and cerebral palsy.
| IPO initial filings (July 9 through July 16) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Mol Global (MOLG.RC) | Malaysian online payment platform for games | $300 | $56 |
| Otonomy (OTIC) | Biotech: sustained therapies for ear diseases | $86 | $0 |
| American Addiction Centers (AAC) | Operates substance abuse treatment centers | $75 | $116 |
| ReWalk Robotics (RWLK) | Israeli exoskeleton maker for paraplegics to walk | $58 | $1 |
| C1 Financial (BNK) | Florida commercial bank with 29 locations | $50 | $69 |
IPO market snapshot
So far this year, 148 IPOs have raised $31.5 billion and produced an average first day return of 14%. The Renaissance IPO ETF (symbol: IPO), a float cap-weighted basket of newly public companies and indicator of post-IPO performance, has gained 0.7% compared with 6.8% for the S&P 500. Over the last 30 days, the IPO ETF has fallen 0.5% compared with +1.9% for the S&P 500. The active IPO pipeline includes 146 companies looking to raise a total of $52.8 billion.
