Tower International, Body Central Cut Offer Prices This Week as IPOs Slump

Tower International Inc. and Body Central Corp. cut the price for their initial public offerings this week, while three companies postponed sales as a rebound in U.S. stocks failed to lift the IPO market.

Cerberus Capital Management LP sold new shares of Tower in an $81.3 million IPO for 11 percent less than it paid to take control of the auto-parts supplier three years ago, and Body Central, the Jacksonville, Florida-based clothing retailer, reduced its offering by as much as 19 percent. NetSpend Holdings Inc. pushed its sale back to next week, while Legacy Healthcare Properties Trust Inc. and U.S. Federal Properties Trust Inc. shelved their deals.

Only four U.S.-based companies have completed IPOs in New York this month even as the Standard & Poor’s 500 Index rallied 15 percent since July 2, data compiled by Bloomberg show. At least 54 sales have been withdrawn or postponed in the U.S. this year, while companies based in China and India account for seven of the 10 best performing IPOs on American exchanges as economic growth in emerging markets outpaces the developed world.

“It underlines the sentiment in the U.S. IPO market,” said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC, which oversees $3 billion. “Really there’s little interest for U.S.-domiciled IPOs. It underlines economic concerns here in terms of the macroeconomic picture.”

VW, Toyota

Tower, which was bought by Cerberus in July 2007 and builds hoods and doors for Volkswagen AG and Toyota Motor Corp., sold 6.25 million new shares at $13 each on Oct. 14, 24 percent less than it sought, Bloomberg data show. The IPO valued the buyout firm’s $181.6 million initial investment at $162.1 million. That stake was part of a $1 billion deal by Cerberus that brought Tower out of bankruptcy just before the credit crisis began.

Cerberus, which was Tower’s only shareholder, spent $14.57 per share for its 12.47 million-share holding, versus the per- share price of $13 that IPO investors paid, its filing with the Securities and Exchange Commission and data compiled by Bloomberg showed. The offering cut the New York-based buyout firm’s stake to 67 percent, according to the filing.

At the midpoint price of $16 each, Tower would have had a market capitalization of about $300 million, debt of about $548 million and $141 million in cash, its filing showed.

The company’s enterprise value, or the sum of its stock and debt minus cash, would then have equaled $707 million, or 4.5 times its earnings before interest, taxes, depreciation and amortization of $157 million in the 12 months ended June 30, according to Tower’s filing and data compiled by Bloomberg.

Relative Value

That compares with the median of 5.7 times Ebitda for the 278 makers of original parts and equipment for cars and trucks, data compiled by Bloomberg show.

Tower’s initial sale was the second from the auto industry this year, following electric sports-car maker Tesla Motors Inc. in June. It also came before a planned IPO from General Motors Co., 61 percent owned by the U.S. government after its own bankruptcy. GM will seek to raise $8 billion to $10 billion next month, less than the Detroit-based automaker had targeted, according to people familiar with the matter.

Body Central sold 5 million shares at $13 each on Oct. 14 after offering them for $14 to $16, SEC filings and data compiled by Bloomberg show.

NetSpend, the Austin, Texas-based provider of reloadable prepaid debit cards, delayed its $222 million IPO until next week. Legacy Healthcare of Orlando, Florida, also postponed its $166 million sale, according to data compiled by Bloomberg.

Government Properties

U.S. Federal Properties Trust, the Kansas City, Missouri- based real estate company that manages properties leased to the U.S. government, shelved a $289 million initial sale on Oct. 11.

“The volume of IPOs indicates that investors are interested in participating,” said Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $350 billion. However “the pricing is not as robust as hoped for, and that could indicate that prices are being set a bit more aggressively and the market isn’t robust enough to support that pricing,” he said.

NetSpend and five other companies are scheduled to raise about $822 million combined next week, data compiled by Bloomberg show. ShangPharma Corp., a Shanghai-based pharmaceutical and biotechnology research company, and Beijing- based TAL Education Group, which offers after-school tutoring services, will offer shares after companies from China posted the three biggest gains among U.S. IPOs in 2010.

‘Willing to Pay’

China’s economy will grow 9.6 percent in 2011, according to estimates from the Washington-based International Monetary Fund. That compares with 2.2 percent for developed nations and 2.3 percent forecast for the U.S.

“What we’ve seen this year is the market has been very, very selective,” said Timothy Cunningham, a manager at Santa Fe, New Mexico-based Thornburg Investment Management, which had $56 billion in assets as of June 30. “They’re willing to pay up for the really good, premium stories, with the good fundamentals and big opportunities in front of them.”

ShangPharma will sell 5.8 million American depositary receipts at $14.50 to $16.50 on Oct. 19, while TAL Education will offer 12 million ADRs for $8 to $10 each the same day, according to SEC filings and data compiled by Bloomberg.

Bravo Brio Restaurant Group Inc., the Columbus, Ohio-based Italian restaurant chain operator, will sell 8.3 million shares at $14 to $16 each the next day.

Vera Bradley Inc., the Fort Wayne, Indiana-based women’s accessory retailer, also plans to offer 11 million shares at $14 to $16 each next week. Aegerion Pharmaceuticals Inc., the Bridgewater, New Jersey-based biopharmaceutical company that develops drugs treating lipid disorders, will sell 4.7 million at $14 to $16, SEC filings and data compiled by Bloomberg show.

To contact the reporter on this story: Cecile Vannucci in New York at cvannucci1@bloomberg.net.

To contact the editor responsible for this story: Daniel Hauck at dhauck1@bloomberg.net.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.