The excesses of the buyout boom continue to haunt private equity firms, as the experience of HD Supply Holdings illustrates.
HD Supply, an industrial distribution company that three private equity firms bought for $8.5 billion in 2007, would be valued at far less than that in an initial public offering, according to a filing on Thursday.
The company is expecting to price its stock between $22 and $25 a share, raising $1.2 billion at the midpoint of the range. That would value the entire company at $4.3 billion.
Still, the private equity owners â€" the Carlyle Group, Bain Capital and Clayton Dubilier & Rice â€" are looking to take the company public at a time when stock prices have been on a tear. Conditions seems favorable for investors looking to offload their holdings.
A string of private equity-backed companies have recently tapped public markets, including SeaWorld, the theme park operator controlled by the Blackstone Group, and Quintiles Transnational, a pharmaceutical testing company owned by TPG and Bain Capital.
HD Supply, which once was part of Home Depot, plans to use the proceeds from its I.P.O. to reduce its debt. Its three private equity owners each hold about 28 percent of the company.
With more than 600 outlets in the United States and Canada, HD Supply serves home builders, industrial businesses and other customers, with Home Depot accounting for about 4 percent of sales.
The company has experienced growth under its private equity owners, with net sales increasing 14.3 percent, to $8 billion, for its fiscal year that ended Feb. 3. The company reported a loss of $1.2 billion that year, larger than the year prior.
As of May 5, HD Supply reported $6.6 billion of total long-term debt. It is aiming to trade on the Nasdaq under the ticker symbol “HDS.â€
The offering is being handled by Bank of America Merrill Lynch, Barclays, JPMorgan Chase and Credit Suisse.
