NEW YORK (Reuters) – AGA Medical Holdings Inc (AGAM.O), a maker of devices for heart defects and vascular diseases, lowered the price range of its initial public offering ahead of the deal’s pricing on Tuesday, becoming the latest private equity-backed company to face weak demand.
AGA, whose largest shareholder is private equity firm Welsh, Carson, Anderson & Stowe LP, lowered the expected price range for its IPO to between $15 and $16 per share, down 22.5 percent from the original range of $19 to $21, according to an updated regulatory filing.
The number of shares being sold in the IPO, which is expected to price after the markets close on Tuesday, remained the same at 13.75 million. But the existing shareholders will be selling 6.7 million shares rather than the 5.25 million they had originally planned to sell.
Minnesota-based AGA itself will be selling fewer shares, and expects to raise $96.3 million, which it will use to pay down debt, down from its earlier estimate of $154.2 million.
AGA is scheduled to begin trading on Nasdaq on Wednesday under the symbol AGAM.
The last IPO by Welsh, Carson — that of hospital operator Select Medical Holdings Corp (SEM.N)– priced below range last month and is down 3 percent from its IPO price.
The private equity firm’s move could send a message that it is “unloading” a portfolio company through the IPO and may hurt investor interest, an analyst said.
“This is a very peculiar choice by the firm that does not seem to put investors’ interests first,” said Scott Sweet, senior managing partner at advisory firm IPO Boutique.
“This does not bode well for the upcoming private-equity deals, and frankly we are overloaded with them.”
Last week, RailAmerica (RA.N), owned by private equity funds managed by Fortress Investment Group LLC (FIG.N), lowered its price range ahead of its IPO, while Fortress sold 1 million more shares than expected. Shares fell 8 percent in their debut.
AGA’s lead product, the Amplatzer devices, treat structural heart defects and made up 55.4 percent of its sales in the half-year ended June 30. AGA warned in its prospectus it was likely to remain dependent on Amplatzer “for the next few years.”
The company has other products in development, including vascular grafts.
Welsh, Carson, Anderson & Stowe will still own 51.7 percent of the company after the IPO.
AGA sales in the first half of 2009 came to $94.4 million, with a loss of $4.2 million.
The IPO’s underwriters, led by Bank of America Merrill Lynch, Citi and Deutsche Bank Securities, have the option to buy an additional 2.06 million shares.
(Reporting by Phil Wahba, editing by Dave Zimmerman)