HD Supply Said to Join CDW in Cutting IPO Price Amid Stock Drop

HD Supply Holdings Inc. (HDS) and CDW Corp., which had sought a combined $1.97 billion in U.S. initial public offerings this week, plan to sell stock for less after markets tumbled, said people with knowledge of the matter.

HD Supply told prospective investors it’s offering shares for $18 to $20, compared with an original range of $22 to $25, said two people, who asked not to be named as the information wasn’t public. CDW lowered its range to $17 to $18, compared with an earlier range of $20 to $23, according to a regulatory filing today. Both IPOs are scheduled to price today, data compiled by Bloomberg show.

The reductions for the companies, both controlled by private-equity firms, coincide with a 3.9 percent decline in the Standard & Poor’s 500 Index over the past week through yesterday. Until now, IPOs by many private-equity-backed companies had priced at the top of proposed ranges this year, bolstered by stocks at record highs last month.

“It feels like people have kind of taken a step back,” Tim Cunningham, who helps oversee $84 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico, said in a telephone interview. “It’s been a tough few weeks, sentiment has turned down quite a bit and it’s definitely harder to bring deals.”

CDW’s private-equity owners, Madison Dearborn Partners LLC and Providence Equity Partners Inc., had planned to offer 4.65 million shares in the IPO and are no longer planning to do so, filings show. CDW is still selling 23.3 million shares.

Original Terms

Representatives for Atlanta-based HD Supply and CDW, based in Vernon Hills, Illinois, didn’t return calls seeking comment. Officials at Madison Dearborn and Providence declined to comment.

CDW had originally planned to seek as much as $641.7 million selling 27.9 million shares on behalf of itself and existing holders, regulatory filings show. Industrial-supplies distributor HD Supply had sought as much as $1.33 billion selling 53.2 million shares, filings show.

CDW’s IPO is being led by JPMorgan Chase & Co., Barclays Plc and Goldman Sachs Group Inc., while HD Supply’s offering is being managed by Bank of America Corp., Barclays, JPMorgan and Credit Suisse Group AG.

HD Supply is owned by Carlyle Group LP, Bain Capital LLC and Clayton Dubilier & Rice LLC. The company reduced its price range after investors raised concerns over the company’s debt level, one person familiar with the matter said. Buyers are concerned that rising interest rates could drag down the growth rate for HD Supply’s business, making it harder for the company to repay debt, the person said.

HD Supply Debt

The midpoint of HD Supply’s original price range would have generated $1.16 billion of net proceeds to the company, which it planned to use to reduce long-term debt to $5.6 billion, filings show. That level still would have exceeded a $4.3 billion valuation for the company’s outstanding stock, data compiled by Bloomberg show.

Private-equity-backed companies including Quintiles Transnational Holdings Inc. (Q) and Pinnacle Foods Inc. priced their IPOs at the top of proposed price ranges earlier this year. Both stocks have risen since those initial public offerings.

To contact the reporter on this story: Lee Spears in New York at lspears3@bloomberg.net

To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net

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