Shares of US Foods Rise in Market Debut
26 May 2016 - 4:00PM
Dow Jones News
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 maureen.farrell@wsj.com and Corrie
Driebusch at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
May 26, 2016 10:45 ET (14:45 GMT)
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