Bain Capital’s Burlington Surges After $227 Million Offering

Burlington Stores Inc. surged in its debut, after raising $226.7 million in the first initial public offering of a brick-and-mortar retailer acquired by Bain Capital LLC during the buyout boom.

The stock jumped 47 percent to $25.01 at the close in New York. Known for its Burlington Coat Factory stores, the retailer sold 13.3 million shares for $17 each, above the marketed range of $14 to $16. Bain Capital didn’t sell any of its 54.4 million shares in the IPO.

Bain Capital acquired Burlington, Toys “R” Us Inc., Michaels Stores Inc. and Guitar Center Inc. in deals valued at $17 billion between 2004 and 2007. Exiting these investments has proven a challenge as sales growth at chain stores was hit by the shift to online shopping. Bain Capital and its partners tried to take Toys “R” Us public in 2010, while Michaels has yet to proceed with an IPO that it filed for in March 2012.

“It’s the perfect time for Bain and Burlington to do an IPO,” said Burt Flickinger, managing director at Strategic Resource Group, a consumer-industry consulting firm, who works with Burlington’s suppliers. “Retail is still turning the wrong way, but off-price retail is the only area that’s turning the right way, and Burlington can participate in that.”

Discount Prices

Burlington offers apparel, accessories, home goods and coats for as much as 70 percent off department-store prices, according to the IPO filing. The company posted a loss of $30.6 million in the six months to Aug. 3, compared with a loss of $35.2 million a year earlier, its IPO filing showed.

Charlyn Lusk, a spokeswoman with Stanton Public Relations & Marketing, which represents Boston-based Bain Capital, declined to comment on the Burlington IPO.

Bain Capital wasn’t alone in the wave of retailer purchases, with total private-equity spending on brick-and-mortar stores reaching $36 billion between 2004 and 2007, data compiled by Bloomberg show. Among the specialty retailers that remain private: Apollo Global Management LLC’s Claire’s Inc., and Petco Animal Supplies Inc., which is also owned by Leonard Green & Partners and TPG Capital.

At $17 a share, Burlington has an enterprise value of about $2.71 billion, based on terms in the original filing. That compares with the $2.1 billion that Bain Capital paid for the Burlington, New Jersey-based retailer in April 2006, according to a statement at the time.

Rising Sales

Burlington’s sales have risen for each of the last three years, its IPO filing shows. Revenue reached $2 billion in the six months through Aug. 3, up nearly 10 percent from a year earlier.

“We have been working really hard on transforming the company,” Thomas Kingsbury, chief executive officer of Burlington, said in a phone interview. “We have put a lot of things in place like changing the look of our stores and being more of an off-price retailer than we were back in 2008.”

Burlington plans to use the proceeds from the offering to redeem $170.6 million in senior notes, the IPO filing shows. Bain Capital will hold a 76 percent stake in the company before the overallotment option is exercised, according to the filing.

Bain Capital helped pave the way for the specialty retail model, co-founding Staples Inc. in 1986. The industry transformed during the recession when frugal consumers opted to shop online, where they could more easily compare prices.

JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. managed the IPO. Burlington is listed on the New York Stock Exchange under the symbol BURL.

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