Buyout-backed IPOs raised nearly 45% less in Q2 than they did in Q1, but almost nobody is complaining (the qualifier is for Madison Dearborn, which saw its $525 million Boise Cascade offering fall apart). Why? Because issuance volume was at a seven-year high, and the amount of capital raised ranks as the second-highest ever.
Nineteen buyout-backed companies priced IPOs on U.S. exchanges last quarter, for a total take of approximately $3.48 billion. This was the most buyout-backed companies to price since 20 did so in the fourth quarter of 1997, and just edged out the $3.37 billion raised in Q4 2004 for the all-time silver medal.
Leading the way was telecom clearinghouse services provider NeuStar Inc. (NYSE: NSR), which priced a $605 million offering on June 28, and saw its shares soar over 18% in its first day of trading. The company was founded in 1996 as an operating division of Lockheed Martin Corp., and was acquired three years later in a management buyout that included Warburg Pincus, MidOcean Partners and ABS Capital Partners. As part of the IPO, Warburg Pincus netted over $500 million (in double-digit ROI excess of its original contribution), and still maintains a 35.04% post-IPO ownership position. Minority shareholders MidOcean and ABS also received partial liquidity via the offering.
Next up was the controversial Warner Music Group (NYSE: WMG) IPO, which generated $554.2 million in IPO proceeds, plus another $73 million in management agreement termination fees for buyout investors Thomas H. Lee Partners, Bain Capital, Providence Equity Partners and Edgar Bronfman’s Music Capital Partners. Rounding out the top five were: DSW Inc. (NYSE: DSW), a shoe retailer that raised $267.19 million on June 28; Eagle Bulk Shipping Inc. (Nasdaq: EGLE), a dry bulk shipping company that raised $201.6 million on June 21 and; New Skies Satellite Holdings Ltd. (NYSE: NSE), a communications satellite provider that raised $196.4 million on May 9.
The majority of buyout-backed IPOs in Q2 were trading above their offering prices as of the end of trading last Tuesday (Buyouts went to press one day before the quarter formally closed). The biggest gainer was Zumiez Inc. (Nasdaq: ZUMZ), which had risen from $18 per share to $30.27 per share. Next up was Verifone Inc. (NYSE: PAY), which leaped from $10 per share to $16 per share. The worst performer was Earle M. Jorgenson Co. (NYSE: JOR), a metal producer backed by Kelso & Co., which dropped 19.5% from its $10 per share offering price. Overall, the average aftermarket performance for Q2 2005 IPOs (excluding the late pricings of NeuStar and DSW), was approximately 11.27 percent.
Nineteen buyout-backed companies filed for IPOs in Q2, with three of them already having priced. There also were four withdrawals, although one, Medex Inc., was prompted by a better offer on the M&A market for company owner One Equity Partners