Heightened IPO activity continues with 11 IPOs set to raise $3.2 billion this week, following the nine companies that went public last week. The week ahead should see five private equity-backed IPOs, including four LBOs and one MLP controlled by Arclight. Frac sand company Fairmount Santrol (FMSA) could be the year's 10th billion-dollar IPO (there were 6 in 2013). Following Alibaba (BABA) and CyberArk (CYBR), we'll see another high-growth e-commerce IPO with Wayfair (W) and a cloud-based software provider with Yodlee (YDLE). Two more tech deals are already on the calendar for next week. Along with the uptick in tech and a surge of PE deals, three biotechs expect to price this week, suggesting the biotech window remains open heading into the fourth quarter.
Four LBOs from Blackstone, Madison Dearborn, Bain and American Securities
The week's first deal, Vivint Solar (VSLR), is expected to raise $350 million. The company should see some interest based on the breakout performance of 2012 IPO SolarCity. Vivint also boasts a growing market for residential solar panels and long-term contracts with homeowners, but it must prove it can succeed outside of its mostly-California market and achieve positive gross margins. Two other 2014 Blackstone-backed IPOs, Catalent (CTLT) and La Quinta (LQ), trade 22% and 13% above their respective offer prices.
Backed by Madison Dearborn, VWR (VWR) should be the week's second-largest deal and is expected to raise $600 million. VWR is a highly-leveraged company in a stable and growing global market for chemicals and laboratory supplies. It was formerly a part of Univar (UNVR), an IPO in the pipeline that we estimate could raise $1 billion. VWR should be the PE firm's first IPO of 2014.
Atento (ATTO), bought by Bain from Telefonica in 2012 for $1.3 billion, is a leading Latin America call center operator and the world's third-largest provider of CRM BPO services. The year's other Bain LBO to go public, plastics maker Trinseo (TSE), rose on its first day but now trades about 10% below the offer price. The Michaels Companies (MIK), backed by Blackstone and Bain, traded flat on its first day and +3% since then.
American Securities' Fairmount Santrol should be the week's largest deal at $1 billion. Like Vivint, Fairmount Santrol benefits from the success of recent IPO Emerge Energy Services (EMES), a frac sand company that raised $128 million in May 2013 and has gained over 550% since then. Another company brought public by American Securities, Advanced Drainage Systems (WMS), has traded up 36% from its July IPO.
Arclight Capital's midstream MLP
JP Energy Partners LP (JPEP) operates crude oil pipelines, storage facilities, supply and logistics assets and refined products terminals across the Midwest. Its suite of services are the result of several acquisitions, including one of the largest portable propane cylinder exchanges in the US. Last week's midstream MLP, CONE Midstream (CNNX), priced above the range and jumped 38% in first-day trading as investors seek growth with transparent cash flow. CONE operated a fee-based model with its parent companies, while JP Energy, controlled by Arclight Capital, has more moving parts.
Two high-growth technology IPOs: e-commerce and software
Wayfair launched its IPO the afternoon after Alibaba popped 38%, and no doubt hopes for a similar response when it prices a proposed $292 million offering. The company operates five retail websites focused on home furnishings, a fragmented market with few dominant online players. Wayfair's sales should grow 35% to $1.2 billion in 2014, though heavy marketing efforts result in near-term losses. It is controlled by its co-founders through super voting stock, who will also receive proceeds on the offering.
Yodlee, expected to raise $75 million, offers a high-growth SaaS platform that powers the consumer financial apps of 9 of the 15 largest US banks. The company has rapidly grown sales to $70 million while its EBITDA margin swung positive last year. It is backed by a group of well-known investors, including Warburg Pincus, Bank of America (also a bookrunner and Yodlee's largest customer), IVP and Accel Partners. Smaller enterprise software IPOs faced hurdles earlier in the year but the space appears to be picking up based on the performance of CyberArk, TubeMogul (TUBE) and the launch of HubSpot (HUBS) for next week.
Three more biotechs
Biotechs have been a constant in the 2014 IPO market, and three more are expected to price this week. That number could be five if Viking Therapeutics (VKTX) and rEVO Biologics (RBIO) are able to drum up demand on their day-to-day deals. If Calithera and Dermira price at the midpoint or above (only 33% in the 3Q14 have), their IPOs would put them in the top third of biotechs by deal size. Citi and Leerink are serving as the joint bookrunners on both Calithera and Dermira; the two underwriters were also behind Ardelyx (ARDX) in June.
Calithera Biosciences (CALA) is set to raise $84 million when it prices. The most recent biotech focused on solid tumors, Loxo Oncology (LOXO), traded flat on its first day and has dropped 7% since then.
Dermira (DERM) is expected to raise $80 million. The biotech is targeting psoriasis, sweating and acne. In September, Israeli acne biotech Foamix (FOMX) slashed its valuation ahead of pricing and has traded down 5%. Dermira is one of several biotechs in the pipeline with a psoriasis indication, including Virobay (VBAY), Coherus BioSciences (CHRS) and Forward Pharma (FWP; expected to launch soon).
EyeGate Pharmaceuticals (EYEG) is a microcap company focused on eye inflammation.
| IPOs set to price during the week of Sep 29, 2014 | |||
| Company (Ticker) | Business | Lead underwriters |
Deal Size ($mm) |
| Vivint Solar (VSLR) |
Blackstone: Residential solar panels |
Goldman BofA |
$350 |
| VWR (VWR) | Madison Dearborn: chemicals and lab supplies | BofA Goldman |
$600 |
| Atento (ATTO) |
Bain: Latin America call centers | Morgan Stanley Credit Suisse |
$300 |
| Wayfair (W) | Online home goods retailer | Goldman BofA |
$292 |
| JP Energy Partners LP (JPEP) | Arclight: Midstream energy assets | Barclays BofA |
$275 |
| Calithera Biosciences (CALA) | Biotech: inhibits tumor metabolism | Citi Leerink |
$84 |
| American Addiction Centers (AAC) |
Six substance abuse centers | William Blair Raymond James |
$65 |
| Fairmount Santrol (FMSA) | American Securities: Sand for oil and gas E&Ps | Morgan Stanley Wells Fargo |
$1,001 |
| Dermira (DERM) | Biotech: skin conditions | Citi Leerink |
$80 |
| Yodlee (YDLE) | SaaS platform for financial apps | Goldman Credit Suisse |
$75 |
| EyeGate Pharmaceuticals (EYEG) | Biotech: eye inflammation | Aegis Capital | $25 |
The following IPOs are expected to price this week:
American Addiction Centers (AAC), which operates six inpatient substance abuse treatment centers in the US with over 450 beds, plans to raise $65 million by offering 5.0 million shares at a price range of $12 to $14. At the midpoint of the proposed range, American Addiction Centers would command a market value of $270 million. American Addiction Centers, which was founded in 2004, booked $116 million in sales over the last 12 months. The Brentwood, TN-based company plans to list on the NYSE under the symbol AAC. William Blair and Raymond James are the joint bookrunners on the deal.
Atento (ATTO), a Latin American call center operator carved out of Telefónica by Bain, plans to raise $300 million by offering 14.6 million shares at a price range of $19 to $22. At the midpoint of the proposed range, Atento would command a market value of $1.5 billion. Atento, which was founded in 1999, booked $2.3 billion in sales over the last 12 months. The Madrid, Spain-based company plans to list on the NYSE under the symbol ATTO. Morgan Stanley, Credit Suisse and Itau BBA are the joint bookrunners on the deal.
Calithera Biosciences (CALA), an early-stage biotech developing a drug platform that inhibits tumor metabolism, plans to raise $84 million by offering 6.0 million shares at a price range of $13 to $15. At the midpoint of the proposed range, it would command a market value of $236 million. Founded in 2010, the San Francisco, CA-based company plans to list on the NASDAQ under the symbol CALA. Citi and Leerink Partners are the joint bookrunners on the deal.
Dermira (DERM), a biotech targeting skin conditions such as psoriasis, excessive sweating and acne, plans to raise $80 million by offering 5.4 million shares at a price range of $14 to $16. At the midpoint of the proposed range, it would command a market value of $402 million. Founded in 2010, the Redwood City, CA-based company plans to list on the NASDAQ under the symbol DERM. Citi and Leerink Partners are the joint bookrunners on the deal.
DT Asia Investments (CADTU), a blank check company formed to acquire a middle-market growth business in China, plans to raise $60 million by offering 6.0 million shares at $10 per share. At that price, it would command a market value of $79 million. Formed in 2014, the Hong Kong-based company plans to list shares and warrants on the NASDAQ under the symbol CADTU. Earlybird Capital is the lead bookrunner on the deal.
EyeGate Pharmaceuticals (EYEG), a late-stage biotech developing a treatment for eye inflammation, plans to raise $25 million by offering 1.9 million shares at a price range of $12 to $14. At the midpoint of the proposed range, it would command a market value of $101 million. Founded in 2004, the Waltham, MA-based company plans to list on the NASDAQ under the symbol EYEG. Aegis Capital is the lead bookrunner on the deal.
Fairmount Santrol (FMSA), an LBO'd global provider of sand and sand-based products to oil and gas E&Ps, plans to raise $1.0 billion by offering 44.5 million shares at a price range of $21 to $24. At the midpoint of the proposed range, it would command a market value of $4.0 billion. Fairmount Santrol, which was founded in 1986, booked $1.2 billion in sales over the last 12 months. The Chesterland, OH-based company plans to list on the NYSE under the symbol FMSA. Morgan Stanley, Wells Fargo Securities, Barclays and Goldman Sachs are the joint bookrunners on the deal.
JP Energy Partners LP (JPEP), an MLP operating midstream energy assets for crude oil, refined products and natural gas liquids, plans to raise $275 million by offering 13.8 million shares at a price range of $19 to $21. At the midpoint of the proposed range, it would command a market value of $734 million. JP Energy Partners LP, which was founded in 2010, booked $2.1 billion in sales over the last 12 months. The Irving, TX-based company plans to list on the NYSE under the symbol JPEP. Barclays, BofA Merrill Lynch, Deutsche Bank and RBC Capital Markets are the joint bookrunners on the deal.
Vivint Solar (VSLR), a Blackstone-backed spinoff that provides residential solar energy systems, plans to raise $350 million by offering 20.6 million shares at a price range of $16 to $18. At the midpoint of the proposed range, it would command a market value of $1.9 billion. Vivint Solar, which was founded in 2011, booked $14 million in sales over the last 12 months. The Provo, UT-based company plans to list on the NYSE under the symbol VSLR. Goldman Sachs, BofA Merrill Lynch, Credit Suisse and Citi are the joint bookrunners on the deal.
VWR (VWR), a Madison Dearborn-backed supplier of general and specialty laboratory products, plans to raise $600 million by offering 25.5 million shares at a price range of $22 to $25. At the midpoint of the proposed range, it would command a market value of $3.0 billion. VWR, which was founded in 1852, booked $4.3 billion in sales over the last 12 months. The Radnor, PA-based company plans to list on the NASDAQ under the symbol VWR. BofA Merrill Lynch, Goldman Sachs, J.P. Morgan and Barclays are the joint bookrunners on the deal.
Wayfair (W), a leading online retailer of home furnishings with over $1 billion in sales, plans to raise $292 million by offering 11.0 million shares at a price range of $25 to $28. At the midpoint of the proposed range, it would command a market value of $2.3 billion. Wayfair, which was founded in 2002, booked $1.1 billion in sales over the last 12 months. The Boston, MA-based company plans to list on the NYSE under the symbol W. Goldman Sachs, BofA Merrill Lynch and Citi are the joint bookrunners on the deal.
Yodlee (YDLE), which provides a SaaS platform for consumer-facing financial apps, plans to raise $75 million by offering 6.3 million shares at a price range of $11 to $13. At the midpoint of the proposed range, it would command a market value of $375 million. Yodlee, which was founded in 1999, booked $79 million in sales over the last 12 months. The Redwood City, CA-based company plans to list on the NASDAQ under the symbol YDLE. Goldman Sachs, Credit Suisse and BofA Merrill Lynch are the joint bookrunners on the deal.
Renaissance Capital will have Pre-IPO Research available on each of these upcoming IPOs prior to its pricing.
Last week, there were 10 IPO pricings. CyberArk Software (CYBR), which provides enterprise software that detects cyber attacks on privileged accounts, was the week's winner, ending up 86% from its IPO price.
Last week's largest deal, Citizen's Financial Group (CFG) is eligible to enter the Renaissance IPO ETF, which holds a market-cap weighted basket of recently-priced IPOs.
