Apollo's Noranda Aluminum Slashes IPO by 70% in 2010's Biggest Reduction

Apollo Global Management LLC’s Noranda Aluminum Holding Corp. cut its initial public offering by the most of any U.S. company in 2010 after three private- equity-backed deals this week left buyers with losses.

Noranda, the maker of rolled coils owned by Leon Black’s Apollo, raised $80 million yesterday after price cuts helped reduce proceeds by 70 percent, Bloomberg data and a regulatory filing showed. Express Inc., the retailer owned by Golden Gate Capital, retreated in its first two days of trading, while Carlyle Group’s Niska Gas Storage Partners LLC of Houston has slumped 8.3 percent since its IPO on May 11.

Companies backed by private-equity firms are being forced to take the biggest discounts for their initial sales after leveraged-buyout funds returned less money to clients last year than at any time since at least 2000. LBO firms turning to IPOs were whipsawed as U.S. equity markets fell by the most in a year last week and the Dow Jones Industrial Average suffered the biggest intraday decline since the crash of 1987.

“It’s a buyer’s market, not a seller’s market,” said Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas in Norfolk, Virginia, which manages $1.5 billion. “If an investor is interested in an IPO coming from private equity, they’re going to make sure it’s a cheap pricing.”

Photographer: Jamie Rector/Bloomberg

Apollo Advisors LP founding partner Leon Black. Close

Apollo Advisors LP founding partner Leon Black.

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Photographer: Jamie Rector/Bloomberg

Apollo Advisors LP founding partner Leon Black.

Today’s Trading

Noranda gained 10 percent to $8.80 in New York Stock Exchange trading today. JinkoSolar Holding Co. increased 0.1 percent to $11.01 after the company raised $64 million selling American depositary receipts. The maker of silicon wafers and solar cells based in China’s Jiangxi Province had postponed an $85 million offering in February.

At least 16 companies around the world have shelved IPOs in May. Waves of computerized trading exacerbated a selloff last week sparked by Europe’s debt crisis, pushing a gauge of U.S. stock volatility to the biggest jump in its two-decade history.

The Standard & Poor’s 500 Index then rebounded by the most in a year on May 10 and advanced 2.2 percent this week. That helped encourage seven companies to price their initial offerings. Four of the completed deals were backed by LBO firms.

“We did our best to make our company ready,” Longgen Zhang, JinkoSolar’s chief financial officer, said in an interview at the New York Stock Exchange. “The last two weeks, the financial markets were not good. That didn’t make any difference to us. This week the markets came back and the investor understands our story.”

Relative Value

Noranda raised 30 percent of what it originally sought. The Franklin, Tennessee-based company sold 10 million shares at $8 each after asking for as much as $16 for 16.67 million shares.

The original terms of the IPO would have trimmed Noranda’s debt to $545 million, or about 3.9 times its implied earnings before interest, taxes, depreciation and amortization of $141.2 million over a full year, based on its first-quarter results.

That would have been more than double the median of 1.87 times debt-to-2010 Ebitda for 26 aluminum producers globally, data compiled by Bloomberg show.

Noranda’s original deal would have exceeded Apollo’s $240 million sale of Metals USA Holdings Corp., the largest IPO of one of the private-equity firm’s portfolio companies since the credit crisis. Fort Lauderdale, Florida-based Metals USA, which priced its shares above the forecast range, has lost 25 percent since its listing. Bank of America Corp. led Noranda’s sale.

Seismic Data

The 70 percent reduction in Noranda’s IPO exceeded the biggest cuts in private-equity offerings this year.

Global Geophysical Services Inc., the Missouri City, Texas- based collector of underwater seismic data backed by Kelso & Co. of New York, raised 54 percent less than the $196 million that it asked for in April. Blackstone Group LP in New York, the largest LBO firm, raised less than half of what it sought for York, Pennsylvania-based Graham Packaging Co. in February.

The discounts haven’t guaranteed larger returns for investors. While Graham Packaging has gained 22 percent since its IPO, more than double the S&P 500’s advance in the same period, Global Geophysical has declined 13 percent.

Express, the Columbus, Ohio-based specialty-apparel retailer, sold 16 million shares at $17 each on May 12 after asking for as much as $20. The stock slid 1.5 percent yesterday and 5.3 percent today.

Golden Gate, Express

Bank of America of Charlotte, North Carolina, and New York- based Goldman Sachs Group Inc. managed the deal. Golden Gate Capital, the San Francisco-based LBO firm that oversees $9 billion, owned a 67 percent stake in Express before the IPO.

At the original midpoint price of the IPO, the operator of 573 U.S. outlets was valued at 22.39 times its 2009 per-share net income. That’s more than twice as much as the median ratio for 30 publicly traded U.S. competitors, Bloomberg data show.

Roadrunner Transportation Systems Inc., the transportation and logistics company owned by Thayer/Hidden Creek of Washington, sold 10.6 million shares at $14 each on May 12 after the Cudahy, Wisconsin-based company offered the stock at $14 to $16. Robert W. Baird & Co. in Milwaukee arranged the sale of Roadrunner, which fell 1.1 percent since the offering.

Wave2Wave Communications Inc., which sells wireless networks that let people make telephone calls over the Internet, postponed its IPO yesterday. The Hackensack, New Jersey-based company was offering 8.25 million shares at $9 to $11 each.

Kingtone Wirelessinfo Solution Holding Ltd. slipped 1.5 percent to $3.94 today after its initial offering. The software developer based in Xian in the province of Shaanxi raised $16 million after cutting its sale by as much as 50 percent.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Lee Spears in New York at lspears3@bloomberg.net.

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