The year's most active week by deal count and proceeds is set to cap off the year's busiest month: The six scheduled IPOs would bring May's IPO count up to 16, making it the busiest month since October 2015.
There were no IPOs of LBO'd companies in the 1Q16, but three have been completed so far in the 2Q (+20% avg. return), and three more are set to price, including a $1 billion offering from US Foods. We expect IPO investors to continue to make valuations a sticking point for these highly-levered deals in order to guarantee a healthy return for their risk.
Food Fight: US Foods to raise $1 billion
US Foods Holding (USFD) aims to raise $1 billion in the largest US IPO of an LBO since KKR's last deal, First Data (FDC; -29%), in October 2015. It is the largest IPO by sales ($23 billion) since October 2013. The second-largest US foodservice distributor will undoubtedly be compared to key public peers Sysco (#1) and October 2015 IPO Performance Food Group (PFGC; #3; +26%). Both stocks had made uninterrupted gains in 2016 until last Monday, but a recent slide could pressure US Foods' proposed valuation. US Foods boasts strong margins and free cash flow, which it will need to pay down its massive debt load as the company attempts to improve organic growth.
Hospital better have my money: Helping insurers pay the right amount or get it back
Cotiviti Holdings (COTV) is notable for its strong growth and adjusted EBITDA margins, with over $550 million in sales. The company was formed in 2014 when PE backer Advent International combined Connolly Consulting (audits paid medical claims) with iHealth Technologies (audits filed medical claims). While Cotiviti has signed on most of the nation's top health plans, customer concentration is a key risk in the notoriously uncertain US healthcare industry. It will need to continue to improve free cash flow as it pays down post-IPO debt. It plans to raise $225 million, just 13% of its proposed market cap.
GMS brings wall-to-wall IPO action
Gypsum Supply and Management (GMS) is the industry's leading distributor of wallboard with a 13% market share. LBO'd by AEA Investors in 2014, GMS has grown through acquisitions and the rebounding US construction market, similar to LBO'd landscape supplies distributor SiteOne (SITE; +38%), which went public earlier this month. The company plans to raise $154 million to pay down debt.
Midland States Bancorp (MSBI), which has nearly $3 billion in assets and 46 bank branches in and around Illinois, hopes to continue its acquisition-driven expansion by raising $89 million (reduced from $101 million). The bank postponed an IPO in 2011, and since then has entered mortgage origination and wealth management in new areas.
Two small health care deals with big insider buying
Reata Pharmaceuticals (RETA) hopes to raise $60 million (75% insider buying) at a market cap of $300 million. The biotech raised $1 billion from AbbVie before its lead candidate failed a Phase 3 trial in 2013, but Reata believes that same candidate can be used to treat a new indication, pulmonary hypertension, based on positive Phase 2 results.
Clearside Biomedical (CLSD), targets a $60 million IPO (42% insider buying) at a $260 million market cap. Backed by Hatteras Ventures, Clearside is developing formulations of approved therapies for the eye disease macular edema, a highly competitive space, delivered through its proprietary device.
Landcadia Holdings (LCAHU), a blank check company formed by the CEOs of Landry's and Jefferies, is set to price its large $300 million offering in the week ahead. SPACs are not included in our IPO stats.
Cancer Prevention Pharmaceuticals (CPP), a micro-cap biotech, could price its IPO in the week ahead after it lowered the deal size on Friday by 35% to $16 million ($99 million market cap).
| Renaissance Capital's IPO Calendar - Week of 5/23/2016 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Top 2 bookrunners |
| US Foods Holding Rosemont, IL |
USFD NYSE |
$1,000 | $21 - $24 44,444,444 |
Goldman Sachs Morgan Stanley |
| Second-largest US foodservice distributor LBO'd by KKR and CD&R. | ||||
| Cotiviti Holdings Wilton, CT |
COTV NYSE |
$225 | $17 - $19 12,500,000 |
Goldman Sachs J.P. Morgan |
| Provides analytics-driven payment accuracy solutions mainly to healthcare clients. | ||||
| Gypsum Management and Supply Tucker, GA |
GMS NYSE |
$154 | $21 - $23 7,000,000 |
Barclays Credit Suisse |
| Leading North American distributor of wallboard and ceiling systems. | ||||
| Midland States Bancorp Effingham, IL |
MSBI Nasdaq |
$89 | $22 - $24 3,872,000 |
Sandler O'Neill Keefe Bruyette Woods |
| Midwestern bank with 81 locations and $2.9 billion in assets. | ||||
| Reata Pharmaceuticals Irving, TX |
RETA Nasdaq |
$60 | $14 - $16 4,000,000 |
Citi Cowen & Co |
| Developing therapies for life-threatening forms of pulmonary hypertension. | ||||
| Clearside Biomedical Alpharetta, GA |
CLSD Nasdaq |
$60 | $14 - $16 4,000,000 |
Cowen & Co Stifel |
| Developing a combination drug-device therapy for eye diseases. | ||||
Institutional investors rely on Renaissance Capital's Pre-IPO Research for these IPOs.
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IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 6% year-to-date, while the Nasdaq is down 5% (S&P flat). Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA), Synchrony Financial (SYF) and Citizens Financial Group (CFG). The Renaissance International IPO Index is down 4% year-to-date, compared to -1% for ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include NN Group and Aena S.A. To find out if this is the best ETF for you, visit our IPO Investing page.
