Albertsons, the private-equity owned US grocery store group, has priced its initial public offering below the previously announced range and has scaled back the listing, in a sign of weak investor demand.
The group, which includes the Safeway supermarket chain, will sell 50m shares at $16 each when the stock lists on Friday, according to two people with knowledge of the sale. The company was initially aiming to sell 65.8m shares between $18 and $20, according to a filing with the US securities regulator submitted last week.
The IPO will raise $800m through the offering, down from the $1.51bn it could have sold at the top of the range under its initial plan — a sum that would have made the IPO the fourth-largest of the year. The revised share sale gives the group a valuation of about $7.6bn based on the number of shares outstanding listed in its regulatory filing and about $9.3bn when factoring in convertible preferred stock purchased by Apollo last month.
Albertsons operates more than 2,200 supermarkets across the US and generated net sales of $62.5bn last year. The downsized IPO comes five years after the group scrapped plans to list due to market jitters.
The company is owned by private equity groups led by Cerberus, which initially invested in Albertsons in 2006 and was planning on reducing its shareholding from 37 per cent to 31 per cent in the IPO. Apollo’s $1.75bn purchase of convertible preferred stock last month gave its existing backers a chance to sell part of their stakes before the offering.
The scaled-back listing comes after a recent run of big IPOs that have attracted strong investor demand. This month Royalty Pharma sold $2.2bn of stock and Warner Music raised $1.9bn in the two biggest deals of the year. Both deals were priced toward the top of their marketed ranges and expanded the amount of shares to be sold before their listing.
“After coronavirus volatility caused the slowest April and May since the Great Recession, IPO activity roared back in June, buoyed by stellar returns,” said Bill Smith, chief executive of Renaissance Capital, a fund manager that invests in IPOs.
Mr Smith anticipates 39 IPOs will deliver $15.2bn in proceeds when the second quarter ends later this month, making it the best period since Q2 last year when Uber’s $9bn listing dragged the quarterly tally to $25.1bn.
“During the [second] quarter, nearly every IPO upsized or priced above the midpoint,” he said. Listings from the period have averaged a 39 per cent first-day pop and are up by more than two-thirds, according to Renaissance Capital data.
The Albertsons IPO is led by joint bookrunners Bank of America, Goldman Sachs, JPMorgan and Citi.