PetSmart-controlled Chewy and its investors raised $1.02 billion in an expanded initial public offering, pricing its shares above an elevated target range.
The online supplier of pet food and accessories sold 46.5 million shares on Thursday for $22 each, according to a statement. The company on Wednesday had raised its price range for 41.6 million shares to $19 to $21, after earlier marketing the stock for $17 to $19.
Chewy, based in Dania Beach, Florida, is valued in the IPO at about $8.8 billion based on the outstanding shares as listed in its U.S. Securities and Exchange Commission filings. Current investors sold most of the shares in the offering, the filing shows.
The offering included 5.6 million shares being sold by Chewy and 40.9 million sold by a wholly owned subsidiary of PetSmart, according to the statement. The IPO is one of only 10 for online product retailers globally to exceed $1 billion, according to data compiled by Bloomberg.
The public offering follows a heated dispute between PetSmart and its creditors over the transfer of Chewy assets ahead of the IPO.
PetSmart and its private equity owners, a group led by BC Partners, moved a portion of the Chewy unit to an unrestricted subsidiary and another to the parent company, both out of creditors’ reach. Lenders sued, arguing that PetSmart was insolvent at the time of the transfer and that the move was fraudulent.
PetSmart resolved the dispute by amending its loan agreement, promising to give lenders a portion of the proceeds from any eventual sale of the online business, according to people with knowledge of the situation. The exact amount of PetSmart’s IPO proceeds that will to pay down debt has yet to be determined.
Before the offering was expanded, current investors were to have retained a 90% stake in the company as well as 99% of the voting rights as a result of the dual-class share, according to the filings. PetSmart was to have 70% of the total shares and 77% of the voting power, the filing shows.
The Chewy site, started in 2011, logged sales of $3.53 billion for the year ended Feb. 3, up from $2.1 billion from the previous fiscal year, according to the company’s prospectus.
Chewy’s IPO should give some financial relief to the closely-held pet-store, which is saddled with over $8 billion of debt due over the next six years. After Chewy raised the price range for the IPO, PetSmart’s bonds rallied to the highest level in two years.
“A strong public-market showing by Chewy will be a positive due to the increased asset coverage it implies and the possibility that some of those assets will be monetized and used to pay down debt in the future,” said Ben Briggs, a high yield and distressed credit analyst with INTL FCStone.
PetSmart last year pegged the value of Chewy at $4.45 billion in private documents shared with investors, according to people with knowledge of those documents. After the IPO, Chewy expects to obtain a new revolving credit facility with covenants, including requirements that it maintain certain financial ratios.
The documents also pointed to figures showing that “pet parents” continue to spend even in times of economic uncertainty. During the 2008 to 2010 recession, overall consumer spending in the U.S. declined, while pet spending increased by 12%, Chewy said, citing the American Pet Products Association.
The offering was led by Morgan Stanley, JPMorgan Chase & Co. and Allen & Co. The shares are expected to begin trading Friday on the New York Stock Exchange under the symbol CHWY.
Source: Ipo Search Results