Clayton, Dubilier & Rice announced it is looking to exit its SIRVA Inc. relocation services platform company and then filed with the SEC to float the business in a $350 million IPO. The company intends to trade on the New York Stock Exchange under the ticker symbol “SIR.”
Credit Suisse First Boston and Goldman Sachs & Co. have been signed on as joint bookrunners for the offering, while Deutsche Bank Securities, Citigroup and JP Morgan have also been tapped to assist with the underwriting. Through the offering, SIRVA expects to take in roughly $230 million after expenses. CD&R declined comment for this story.
The New York-based firm launched the SIRVA platform in 1998 with the $200 million-plus purchase of North American Van Lines from Norfolk Southern Corp. The firm quickly strengthened the business by merging it with Allied Van Lines in 1999 in a deal worth roughly $450 million. From that point, CD&R moved to turn the platform from a run-of-the-mill moving company to an encompassing relocation provider. Among the other add-on deals, SIRVA then completed acquisitions for Cooperative Resource Services, Maison Huet, Moveline and most recently Scanvan.
SIRVA has seen its revenue grow significantly through the acquisitions, while earnings have emerged from negative territory and now reside safely in the black. For the 12 months ended June 30, the business took in $2.3 billion in revenue with $104.4 million in earning from operations. This represented year-over-year jumps of 7% and 48%, respectively. The turnaround in profits is especially noteworthy considering that in the fiscal years 1999, 2000 and 2001, the company posted net losses of no less than $16.9 million and as high as $21.9 million.
CD&R Partner Rick Schnall told Buyouts in June, “We saw a huge opportunity in [moving the company towards] the relocation services business…and because of this strategy SIRVA has been growing earnings over the past few years.”
Additionally, last year CD&R bolstered the management team, installing Brian Kelly as the company’s chief executive. Kelly came to the company from Ford Motor Co.’s Lincoln Mercury division and succeeded CD&R Partner Jim Rogers, who stayed on with the company as chairman.
Throughout its investment, CD&R has contributed a total of $178 million in equity to the SIRVA platform out of its Clayton, Dubilier & Rice Fund V LP and Clayton, Dubilier, & Rice Fund VI LP, which control 56.6% and 23.5% of SIRVA, respectively. The filing did not indicate what CD&R’s stake would be in the company following the IPO, although it did specify it would use the $230 million in proceeds “to purchase or repay a portion of [its] outstanding debt,” which currently stands at $762.2 million.
In its filing, SIRVA noted that following “the application of proceeds” from the offering, its overall balance is expected to be $454 million in outstanding long-term debt and $119.7 million in outstanding short-term loans, totaling $573.7 million. With $188 million going towards the debt, that would leave roughly $42 million from the proceeds to be spent elsewhere.
CD&R gave no signal as to where it sees the stock’s offer price, and the filing also left blank how many shares the firm expects to sell through the offering. Published reports have identified that the rollout should occur sometime this fall.
While the construction of the SIRVA platform has seemingly gone without a hitch, the IPO will not be without its share of obstacles. As acknowledged in the initial IPO filing, SIRVA currently has two antitrust investigations pending. The company said in the dossier, “We have produced and are producing records in response to two grand jury subpoenas issued in connection with investigations being conducted by attorneys in the Department of Justice Antitrust Division through a grand jury in the Eastern District of Virginia. We are cooperating with these investigations and understand that numerous other companies have received similar subpoenas.”
The Justice Department did not confirm any investigation into SIRVA specifically, although Gina Talamona, from the agency’s Office of Public Affairs did say, “There is an ongoing investigation from the antitrust division looking into the transfer of military household goods between the U.S. and Europe.” She could not give a timetable as to the investigation’s conclusion and would not discuss the breadth of the probe throughout the relocation industry. SIRVA is frequently used by the military to move troops, their families and household good from base to base.
The antitrust probe was one of many risk factors made bare in SIRVA’s filing, which also listed the competitive nature of the global relocation sector, the fragmentation of the moving services industry, exposure to dips in the real estate market and the overall economy in general.
However, smoothing over SIRVA’s transition into the public market, is the verity of the company’s ascent in just a short time. CD&R has built SIRVA into a top player in the global relocation space, an estimated $50 billion market. The company operates in 43 countries with familiar brands, such as Allied northAmerican, Pickfords and Maison Huet, among others. In the filing, SIRVA noted that over time it believes the market will continue to grow, and cited that the improvements shown over the past four years demonstrate its ability to boost profitability despite a sour worldwide economy.