HD Supply, CDW Raise 31% Less Than Sought After Stocks Tumble

HD Supply Holdings Inc., a construction-supply company, and CDW Corp., a technology-supply company, raised a combined $1.35 billion in their initial public offerings yesterday, 31 percent less than initially sought after stock markets tumbled.

HD Supply raised $957 million, pricing 53.2 million shares at $18 each, according to data compiled by Bloomberg, after offering them for $22 to $25. CDW, based in Vernon Hills, Illinois, raised $395 million, pricing 23.3 million shares at $17 each, the low end of a reduced range, according to a company statement yesterday. The companies will be listed on the Nasdaq Stock Market under the symbols HDS and CDW.

Both HD Supply and CDW scaled back their offerings yesterday after U.S. stocks fell almost 4 percent in the week through June 25. The selloff followed comments from U.S. Federal Reserve Chairman Ben S. Bernanke that the Fed may taper its stimulus measures.

Atlanta-based HD Supply was taken private in 2007 by Carlyle Group LP, Bain Capital LLC and Clayton, Dubilier & Rice LLC in a deal initially valued at $10.3 billion including debt. The buyout, in the midst of the housing crash, was scaled back to $8.5 billion by the time it was completed two months later.

At the IPO price, HD Supply’s stock is worth less than its private-equity backers paid in their original equity investment. Investors in the buyout paid an average of $19.99 a share for their stake, company filings show.

Debt Level

HD Supply, which initially planned to raise as much as $1.33 billion, reduced its price range after investors raised concerns over the company’s debt level, according to a person familiar with the matter. 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.

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.

CDW and its owners, Madison Dearborn Partners LLC and Providence Equity Partners Inc., initially sought as much as $641.7 million, offering 27.9 million shares for $20 to $23 each. Madison Dearborn and Providence later withdrew plans to sell shares in the offering, regulatory filings show.

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

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