CDW Seeking $641.7 Million in IPO Following 2007 Buyout

CDW Corp., the technology supply company owned by Madison Dearborn Partners LLC and Providence Equity Partners Inc., filed to raise as much as $641.7 million in a U.S. initial public offering.

The company and existing holders are offering 27.9 million shares at $20 to $23 each, according to a regulatory filing today. Vernon Hills, Illinois-based CDW plans to list on the Nasdaq Stock Market under the symbol CDW.

CDW is pursuing the IPO almost six years after its purchase in October 2007, toward the end of the biggest buyout boom on record. A surge in U.S. stocks this year has allowed private-equity firms to fetch more attractive prices for companies they acquired before the financial crisis. Now, investors concerned the U.S. may taper stimulus spending and damp the stock market’s climb may cool toward such offerings, Jeffrey Sica, of Sica Wealth Management LLC, said.

“Sentiment is there and confidence has maintained itself to a point, but it’s all centered around Fed policy,” said Sica, who oversees about $1 billion as the Morristown, New Jersey-based firm’s chief investment officer. Private-equity firms “feel they have a very limited window, and they know they have to get these things out now.”

Owners’ Gain

At the midpoint of the price range, CDW would be valued at about $6.93 billion including debt, or 8.9 times adjusted earnings before interest, taxes, depreciation and amortization of $778.8 million in the 12 months through March 31, data compiled by Bloomberg show.

That compares with the median multiple of about 5.7 times for computer resellers EPlus Inc., Insight Enterprises Inc. and PC Connection Inc., which CDW names as competitors in its filing.

CDW plans to sell 23.25 million of the shares in the offering, while other owners will sell 4.65 million, filings show. Madison Dearborn’s ownership of CDW will fall to 38 percent from 46 percent, while Providence will pare its stake to 34 percent from 41 percent.

The company’s market value at the midpoint would be about $3.6 billion, with the existing owners’ portion worth about $3.1 billion, the data show. That represents a 45 percent gain over their original $2.15 billion investment, according to CDW’s filings and data compiled by Bloomberg.

Takeover Value

CDW generated more than $10 billion in revenue last year, providing software and hardware to corporate and government clients. Madison and Providence’s 2007 takeover of CDW valued the company at $7.28 billion, or about 13 times adjusted Ebitda of $581.9 million for the 12 months through Dec. 31, 2007, filings show. The earnings figures are adjusted to exclude stock-based compensation and costs related to acquisitions and debt extinguishment.

CDW, which also provides cloud-computing, security and mobility services to more than 250,000 customers, joins HD Supply Holdings Inc. in proceeding with an IPO this month. The Atlanta-based construction-supply company owned by Carlyle Group LP, Bain Capital LLC and Clayton Dubilier & Rice LLC is seeking as much as $1.33 billion in a June 26 IPO, according to filings and data compiled by Bloomberg.

Through yesterday the Standard & Poor’s 500 Index has slipped 2 percent since hitting a record on May 21, paring this year’s gain to about 15 percent, data compiled by Bloomberg show. U.S. Federal Reserve Chairman Ben Bernanke has said the central bank may scale back bond buying if the U.S. labor market “improves in a real and sustainable way.”

Private-Equity Gains

While shares sold in all U.S. IPOs this year have gained an average of 23 percent in trading, some of the largest deals have been by private equity-backed companies whose shares have outpaced that average.

SeaWorld Entertainment Inc., the aquatic theme-park operator owned by Blackstone Group LP, raised $807.3 million including an over-allotment in April. The shares gained 38 percent in trading through yesterday. Pinnacle Foods Inc., the Blackstone-owned maker of Hungry-Man dinners, raised $667 million in a March IPO including an over-allotment and has gained 26 percent through yesterday.

JPMorgan Chase & Co., Barclays Plc and Goldman Sachs Group Inc. are leading CDW’s offering. The company filed for the IPO using a $500 million placeholder amount in March.

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