Coty Inc is on deck this week to raise as much as $1.2 billion in its initial public offering from sponsors the Reimann family of Germany,
Warren Buffett’s Berkshire Hathaway Boston-based Berkshire Partners and private equity firm Rhone Group. The IPO is expected to price between $16.50 an $18.50 a share and trade on Thursday under the symbol COTY.
The cosmetics company is readying its debut at a good time for sponsored deals.
“We’re in the best IPO market environment we’ve had post the financial crisis,” said Jeff Bunzel, head of equity capital markets, Americas, for Deutsche Bank. “That’s allowing private equity firms that had investments in many very large and very high quality companies to take them public.”
More recent deals include the $1.1 billion IPO of Quintiles Transnational Holdings Inc. on May 8 from Bain Capital, the $702 million deal for SeaWorld Entertainment Inc. on April 19 from Blackstone Group LP, and the $2.3 billion debut of common stock in DoubleLine Income Solutions Fund on April 26 from Oaktree Capital Group LLC.
All told, the average deal size of U.S. sponsor-backed IPOs in 2013 has climbed to $489 million, up from $234 million in 2012 but down from $616 million in 2011, according to Thomson Reuters data. Some large deals, including the $2.9 billion IPO of Kinder Morgan Inc and the $3.8 billion IPO of HCA, helped boost average deal size in 2011, Thomson Reuters data indicates.
Will Shields, a partner at Ropes & Gray’s private equity practice, said he’s seeing an open window for more buyout shop exits.
Many private equity firms have seen common equity in public companies grow as a percentage of assets under management because of IPO exits and higher stock prices, sources say. Making a consistent splash in the IPO market also helps the case for private equity firms when raising new funds, persons say.
Deals such as Dunkin’ Brands Group and Kinder Morgan—where stock prices have continued to move up even after private equity backers substantially completed their exits—have helped reassure investors, sources say. Bain Capital, Carlyle Group and Thomas H. Lee Partners sponsored Dunkin’ Donuts, which went public in 2011 at $19 a share. Dunkin’s stock is currently trading at $42 a share even though the PE firms sold off their remaining shares in 2012. Entities managed by Goldman Sachs, the Carlyle Group, Riverstone Holdings LLCand Highstar Capital LP owned stakes in Kinder Morgan, which went public at $30 a share. Kinder Morgan’s stock traded at $38.90 a share Monday and the PE firms appear to no longer own shares.
“As private equity firms have done bigger deals, IPOs are a more natural exit,” Shields said. “These are solid companies, many of which had previously been public.”
(Correction: This story has been updated to correct the name of one of the Coty IPO sponsors, which is Berkshire Partners.)