Shares of US Foods Rise in Market Debut

Shares of US Foods Holding Corp. rallied 5% in their debut Thursday, signaling the new-issue market could be returning to health.

They traded up 5.3% at $24.25 in morning trade.

The food-distribution company, owned by private-equity firms Clayton Dubilier & Rice LLC and KKR & Co., sold shares after the market closed Wednesday at $23 apiece, raising $1.02 billion, according to a person familiar with the matter. That makes it the second-biggest IPO in a lackluster year for public debuts. US Foods had targeted a per-share price of between $21 and $24.

The offering values US Foods, which recently tried in vain to sell itself, at just over $5 billion, including a possible underwriters' allotment for shares. Nine years ago, the buyout firms paid just over $7 billion for the company.

After previously paying themselves a big dividend, paying off debt and boosting revenue, the buyout firms have roughly doubled their investment on paper, according to two people familiar with the matter.

The private-equity firms bought US Foods from Dutch supermarket chain Ahold NV at the height of the leveraged-buyout boom. In late 2013, US Foods announced a $3.5 billion sale to rival Sysco Corp. But that deal was called off last year after a federal judge ruled against it on anticompetitive grounds.

The pace of IPOs in 2016 has been the slowest since 2009, partly because of wild stock-market swings at the start of the year and questions about the lofty valuations of many private technology companies. The pace has picked up recently. Seven companies in total are set to go public this week, which would make it the busiest week for IPOs since July. Still, the pace is expected to remain far below recent years' levels, according to market participants.

Mark Hantho, global head of equity capital markets at Deutsche Bank AG, called the recent uptick encouraging, but cautioned: "We're not going to see a stampede of companies coming to market."

The US Foods IPO is now second to that of MGM Growth Properties LLC, a real-estate investment trust that raised $1.21 billion in its April offering.

Few of the companies debuting this year have been the type of big, recognizable names that typically characterize a robust market. Four have been blank-check, shell companies, which typically use IPO proceeds to acquire assets. And 12 have been small biotechnology companies, which typically haven't yet generated profits—or even sales in some cases.

Write to Maureen Farrell at [e-mail] and Corrie Driebusch at [e-mail]

(END) Dow Jones Newswires

May 26, 2016 10:45 ET (14:45 GMT)

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