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US Foods raises $1 billion in year’s second largest IPO: Reuters

(Reuters) — US Foods Holding Corp (USFD.N), a U.S. private equity-owned food distributor, raised $1.02 billion on Wednesday in this year’s second-largest U.S. initial public offering thus far, as new stock market flotations pick up pace.

US Foods, which followed real estate investment trust MGM Growth Properties LLC’s (MGP.N) $1.2 billion IPO last month, has been followed closely by buyout firms because it is the first major leveraged buyout going public since stock market jitters put such debt-laden offerings on ice at the end of last year.

The IPO also offers a path for US Food’s private equity owners – Clayton, Dubilier & Rice LLC and KKR & Co LP (KKR.N) – to sell their shares in the company after their attempted outright sale of US Foods to larger peer Sysco Corp (SYY.N) for $8.2 billion, including debt, fell apart last year when the U.S. Federal Trade Commission moved to block it. US Foods was valued at roughly $5.1 billion in its IPO, including debt.

Two more private equity-owned, albeit much smaller, companies priced their IPOs on Wednesday. Cotiviti Holdings Inc, owned by Advent International Corp raised $237.5 million, while GMS Inc, owned by AEA Investors, raised $147 million.

US Foods priced 44.4 million shares at $23, within its previously indicated $21 to $24 range, the company said in a statement.

The source asked not to be identified because the information is confidential. US Foods did not respond to a request for comment.

For fiscal year 2016, US Foods reported about $23 billion in revenue and adjusted earnings before interest, tax, depreciation and amortization of $875 million, according to its IPO prospectus. It has roughly $5 billion in debt, and it will use the IPO proceeds to pay that down.

Last year, several highly indebted IPO aspirants were given the cold shoulder by investors. Grocery retailer Albertsons Cos Inc and luxury retailer Neiman Marcus delayed their IPO, while U.S. payment processing company First Data Corp downsized its IPO. When credit markets are weak, investors have concerns about a company’s future ability to efficiently pay down debt.

US Foods is only the third private equity backed IPO to have raised more than $1 billion since the start of 2015.
Clayton, Dubilier & Rice and KKR bought US Foods from European grocery Royal Ahold NV in 2007 in a transaction valued at $7.1 billion.

Based in Rosemont, Illinois, US Foods is scheduled to list its shares on Thursday on the New York Stock Exchange under
ticker symbol ‘USFD’.

Goldman Sachs & Co, Mogan Stanley and J.P Morgan are among the underwriters for the offering.