AUGUST IPO WINDOW:
August 7, 2012 2:00 am EST - This week is poised to be the busiest for U.S. IPOs since May - when Facebook's poorly received IPO all but shut the IPO window - as several well known privately-held consumer brands hope to brave the normally quiet August IPO market. What all 3 major IPOs this week have in common: well known brands and easy to understand business models that appeal to individual investors, who have been scared away by mostly poor performance of recent technology IPOs.
Britain’s fabled soccer(football) club, Manchester United (PrivCo Private Company Ticker: MANUP) [NYSE:MAN (Pending)], which had previously considered listing in Asia, will look to price on the New York Stock Exchange. Also, restaurant operators CKE Inc. (Carl’s Jr. and Hardee's) (PrivCo Private Company Ticker: CKERP) [NYSE:CK (Pending)] and Bloomin' Brands (Outback, Carrabba's) (PrivCo Private Company Ticker: BLOOMP) [NASDAQ:BLMN (Pending)] will have their hand at the public markets. All three plan to use IPO proceeds to pay down debt as well as cash out some existing shareholders.
As August is typically a quiet month for IPOs, with many institutional money managers away, PrivCo does not expect that institutional investors will be the primary targets of the offerings. "Instead, CKE, Bloomin' Brands, and Manchester United will look to appeal to the what PrivCo refers to as the 'D.L.D' ('Doctors, Lawyers, Dentists') pool of individual investors, who can understand and easily digest the business models (if not the food) of these consumer facing privately-held companies," said PrivCo CEO Sam Hamadeh in a statement.
Manchester United is looking to muster a $3.8 Billion valuation if it prices at the top of its proposed IPO range, which would make it the most valuable professional team in the world according to PrivCo valuations of privately-held sports teams. Prospective investors should be aware, however, that they will have little say in governance at ManU post-IPO: buyers in the IPO will hold a mere 1.3% of the company's voting power, while the controlling Glazer Family will keep a separate super-voting class of stock giving them a 98.7% voting power after the IPO.
Investors should also note: Manchester United's proceeds are not all being used to pay down the company's substantial $683 million of debt (largely used to finance the Glazer Family's purchase of the team), as roughly half the approximately $300M in IPO proceeds will go to partially cash out the Glazers...a potential red flag (or in soccer terms, at least a yellow card).
Prospective IPO investors this week are advised to set aside emotions when analyzing a company's business. And the brand recognition, the companies' IPO underwriter selection (most all have sizable retail investor arms), and the institutionally quiet August timing, all confirm the fact that "these 3 IPOs aren't institutional deals, but retail deals," pointed out PrivCo's Sam Hamadeh. Each of the IPOs and companies has its strengths and risks, and key objective financial data is summarized below by PrivCo. "Remember that great products or sports teams don't automatically translate into great investments," Hamadeh added.
PRIVCO's SUMMARY OF KEY FACTS ON THREE IPOs ON THIS WEEKS IPO CALENDAR:
1. MANCHESTER UNITED (PrivCo Private Company Ticker: MANUP)
Offering Size: 16.67 Million Shares (50% Primary, 50% Secondary)
Filing Range: $16-$20
Revenue: £331 M (2011), £286 M (2010), £278B (2009)
1 Year Revenue Growth: 15.7%
Offering Amount (Midpoint): $300 million
Proposed Ticker: NYSE:MANU
Expected Trading Begins: August 10th
Bookrunners: Jefferies, Credit Suisse, J.P. Morgan, BofA, Deutsche Bank Securities
Selling Shareholders: Glazer Family
Use of Funds: Proceeds will retire about $140 million in outstanding debt, in addition to allowing the Glazer Family to cash out a portion of its holdings as "selling stockholders"
Notes:
- Founded in 1878, Manchester United is one of most successful and iconic sports teams in the world
- Most successful club in the English Premiership
2011 Revenue Breakdown:
- Ticket & Stadium Sales (£111 million) (34% of Sales)
- Commercial (£103 Million) (31% of Sales)
- Broadcasting (£117 Million) (35% of Sales
- More fans than any other sports team in the world (659 million followers) (88% of Fans are in EMERGING Markets).
- Broadcasting revenue decreased 13% for the year ended June 30, 2012, as a result of Manchester United's failure to reach the knock-out stage of the Champion's League.
2. CKE RESTAUARANTS (PrivCo Private Company Ticker: CKERP)
Offering Size: 13.3 Million Shares (50% Primary, 50% Secondary)
Filing Range: $14-$16
Offering Amount (Midpoint): $199.5 million
Revenue: $1.28 B (2012), $1.33 B (2011), $1.42 B (2010)
1 Year Revenue Growth: -3.8%
Valuation (Top of Range): $1.6 Billion
Proposed Ticker: NYSE:CK
Expected Pricing: Week of August 6th
Bookrunners: Morgan Stanley, Citigroup, Goldman Sachs, Barclays Capital, Credit Suisse, RBC
Use of Funds: It intends to use the proceeds to redeem approximately $82 million of Senior Secured Notes
Notes:
- Has upped the offering size from May when it was looking to raise only $100 million
- One of largest operators and franchisors of Quick Service Restaurants
- 3,263 locations operating in 42 states and 25 foreign countries (As of Q1) under Carl’s Junior and Hardee’s brands
- 73% of total units are franchised
- LTM Revenue is $1.3B and LTM EBITDA is $176M (13.5% EBITDA Margin)
- Growth Model is a Franchise Model
3. BLOOMIN' BRANDS (PrivCo Private Company Ticker: BLOOMP)
Offering Size: 21.4 Million Shares (50% Primary, 50% Secondary)
Filing Range: $13-$15
Revenue: $3.84 B (2011), $3.62 B (2010), $3.60 B (2009)
1 Year Revenue Growth: 5.9%
Valuation: $3.2 Billion
Debt: (approximately $1.82 billion as of March 31, 2012)
Offering Amount (Midpoint): $321 million
Proposed Ticker: NASDAQ:BLMN
Expected Pricing: Week of August 6th
Bookrunners: BofA, Morgan Stanley, JP Morgan, Deutsche Bank, Goldman Sachs
Selling Shareholders: Bain Capital, Catterton
Use of Funds: Intends to use the proceeds to retire 10% of its Senior Secured Notes
Notes:
Bloomin' Brands has an impressive, diversified portfolio of consumer brands:
- Outback Steakhouse (53% of 2011 sales), 775 locations, #1 Position in Respective Market
- Carrabba's (18% of sales), 231 locations, #2 Position in Respective Market
- Bonefish Grill (12% of sales) 158 locations, #2 Position in Respective Market
- Flemmings (6% of Sales) 64 Locations, #4 Position in Respective Market
- Bloomin' Brands' CEO, Elizabeth Smith, has a proven track-record: President of Avon Products, President of US Beverages & Grocery at Kraft Foods
- CFO David Deno was the former Yum! Brands CFO
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