After Rexnord IPO, Apollo Preps Berry

Apollo Global Management LLC, having just completed the IPO of one portfolio holding, has teed up a second one for the same treatment.

The shares of industrial parts maker Rexnord Corp. edged up in their market debut on March 29, closing up 11 percent at $20, sister news service Reuters reported. Shares of Apollo-backed Rexnord opened at $19.05 after pricing at $18, the low end of the expected range. The Milwaukee-based company sold 23.7 million shares, raising over $426 million. The offering valued the company at $1.6 billion.

Rexnord’s IPO comes after a successful mid-March offering from private equity-backed industrial company Allison Transmission Holdings Inc., which is backed by The Carlyle Group and Onex Corp. Private equity firms are aggressively looking for ways to sell or take their companies public this year, as many were unable to do so in late 2011 due to uncertain market conditions.

Rexnord first filed for a $400 million IPO in 2006 when it was owned by Carlyle. But the plan was scrapped after Apollo offered to buy the company for about $1.8 billion. It then filed for a $750 million IPO in 2008, but later withdrew the prospectus.

Bank of America Merrill Lynch, Goldman Sachs, Credit Suisse, Deutsche Bank and Barclays Capital led Rexnord’s underwriting.

Apollo may now exit Berry Plastics after a more than five year hold, sister Web site peHub reported. Evansville, Ind.-based Berry Plastics has filed to go public on March 23 in a deal that could raise $500 million. Berry Plastics did not disclose how many shares it would sell or their price range. That will come in future filings.

Berry Plastics, which makes containers, lids and bottles, has a long history with private equity. In 1996, First Atlantic Capital acquired Berry for a reported $55 million. The firm sold Berry in 2002 to Goldman Sachs Capital Partners and JPMorgan Partners for $837.5 million. In 2006, Apollo and Graham Partners bought Berry Plastics in a $2.25 billion deal. It’s unclear how much Apollo or Graham invested in the deal. After the IPO, Apollo will continue to own a majority of Berry Plastics, according to the SEC filing.

Berry is highly leveraged. The company had long-term debt of $4.5 billion as of Dec. 31 (total liabilities are about $5.5 billion). Berry’s sales, for the calendar year 2011, were $5 billion while net losses came to $247 million. Adjusted EBITDA was $758 million, the filing said.

Private equity firms usually own companies for five to seven years. Apollo has held Berry for more than five. “[Apollo is] at the end of their typical PE hold period,” one banker said. “An IPO makes sense since it’s a fairly large company.” Berry Plastics is so big that it limits the universe of possible buyers, the person said. “It’s not surprisingly they’re going public.”

Private equity firms typically don’t immediately cash out with an IPO. Instead, they hold their stakes and use secondary sales to whittle down their investment.

(Olivia Oran is a correspondent for Reuters in New York; Luisa Beltran is a senior writer for peHub.)