Buyout shops last month called off the flotations of several sponsor-backed companies as market conditions proved too uncertain for a bet on the public markets.
The days surrounding the three postponements were full of downbeat macroeconomic developments. On Feb. 11, the Obama administration estimated the U.S. unemployment rate would average 10 percent for full-year 2010. The news came despite a prior report from the U.S. Department of Labor that estimated the jobless rate had already fallen to 9.7 percent in January. Meanwhile, concerned of a real estate bubble within its own boarders, China announced on Feb. 12 its plans to rein in its bank lending activities in the United States and Europe. The move chipped away at the already thin optimism that a global economic recovery had already taken hold.
Fashion retailer New Look hung up its IPO plans the same day as China’s announcement, despite having had announced its public aspirations less than two weeks earlier. The Apax Partners- and Permira-backed company hoped to raise about £650 million ($1.01 billion) through the offering, with most of the proceeds going to debt reduction, according to Reuters, publisher of Buyouts. New Look was delisted by the private equity duo in 2004 for nearly £700 million.
As for Blackstone, the two postponements could pose a significant snag to the firm’s exit plans. In mid-October, Blackstone Chairman and CEO Stephen Schwarzman said the firm planned to exit as many as eight portfolio companies through IPOs “in the near future.” Since that announcement, Blackstone has held IPOs for three portfolio companies, including plastic container maker Graham Packaging Co. and hospital outsourcer Team Health Inc.
Graham Packaging raised $167 million in its debut on the New York Stock Exchange last month. Shares debuted at $10 each, though the company originally planned to IPO at between $14 and $16 per share. At press time, Graham Packaging was trading at $10.47 a share. In December, Blackstone and other investors took Team Health Inc. public in a $159.6 million IPO. Shares hit the market at $12 a piece and have since climbed nearly 23 percent to $14.75 as of press time.
But those last two public events may have been the firm’s last for the immediate future, leaving at least five portfolio companies waiting in the wings for the markets to improve. “Since we announced our intention to float, there has been significantly increased volatility and uncertainty in global equity markets, as a result of macro circumstances unrelated to our business,” said Travelport CEO Jeff Clarke in a statement.
Blackstone bought travel services provider Travelport for about $4.3 billion in 2006. The company hoped to raise $1.78 billion through its IPO, which was scrapped on Feb. 10. “The business remains on track to continue delivering outstanding value for its shareholders. We will consider bringing it back to the market at a future date, when equity market conditions are more favorable,” Clarke said.
Travelport’s revenue fell 14 percent to about $1.7 billion for the first nine months of 2009 from the same period the year before. During the same period, its net loss widened to $872 million from $98 million the year before. In a January regulatory filing, the company said it expected its full-year 2009 adjusted EBITDA to come in at about $631 million.
Merlin Entertainments, an operator of theme parks including Legoland, put off its proposed IPO the day after Travelport did (Feb. 11). According to Reuters, the company intended to list its shares on the London Stock Exchange in an offering valued at £2 billion.
“We continue to consider and debate the options for our future ownership structure,” Reuters reported the company to have said. “All options, including an IPO, remain under consideration but we do not expect to reach any conclusion in the near future.”
Blackstone acquired Merlin Entertainments in 2006 from