Hirepool IPO pulled
Hirepool’s initial public offering has been withdrawn after institutional investors baulked at the offer price.
It is understood local fund managers could not accept a last-minute discount to the offer price during a book build over night.
Hirepool's majority owner, Australian private equity company Next Capital, and its co-owners Macquarie and Hunter Powell Investments had put an indicative price tag of $1.10 to $1.50 a share on the company.
The issue had hoped to raise between $175.3 million and $261.8 million with about $130 million of new capital.
However there was significant disquiet from some local institutions at the price.
“The way I figure it, the offer is being priced, at the bottom end, 20% too high," one market source told NBR’s Shoeshine columnist last week.
NBR Online understands local fund managers struggled to get to even 90c a share.
Joint lead managers Deutsche Craigs, Macquarie Securities (NZ) and UBS New Zealand sent an email to non-affiliated brokers this morning to confirm the IPO was not going to proceed at this time.
NBR understands Hirepool’s financial sponsors may now try to attract a trade buyer or private equity buyer.
The equipment rental company has since issued a statement confirming the IPO has been cancelled.
"Given the strength of the New Zealand economy and the positive outlook for Hirepool, Next Capital Pty Limited on behalf of the Next Capital Funds, have determined that they are comfortable retaining control of the Hirepool business," the company says.
Organising brokers are understood to be "gutted" at the outcome. However, the failure to bring Hirepool to market is not expected to be a significant damper on further upcoming IPOs such as Scales Corp and MetroGlass, and this week's listing of Serko and Gentrack.
While Hirepool had seen good demand from retail investors, institutional investors weren't confident there would be enough support for the stock after it listed, especially with Next remaining a relatively large shareholder. The IPO would have come amid a swathe of stock sales, including Serko, Gentrack, ikeGPS and Scales Corp, giving investors plenty of choice on where to put their funds.
Existing shareholders are said to be happy to remain owners of Hirepool, given the outlook for the economy and the business.
Hirepool is projecting profits from 2015, after years of losses, having squeezed out costs since buying major rival Hirequip out of receivership last year and using its initial public offering to pay down debt, according to its prospectus.
Hirepool is forecasting a net profit of $25 million for the year ending June 30, 2015, from a pro forma loss of $17.8 million in the current year, according to the company’s prospectus. After adding back finance costs, depreciation and amortisation of Hirepool and Hirequip, pro forma aggregated earnings before interest, tax, depreciation and amortisation are forecast at $34.5 million this year and $60.5 million in 2015.
Hirepool alone has posted net losses each year from 2009, according to the prospectus, mostly reflecting finance costs. Hirequip achieved a profit in 2012 and for the 10 months to May 6 2013, following three years of losses, the figures show.
Following the merger, Hirepool is the nation’s only generalist hire equipment company, although it has only about 19.6 percent of the market based on last year’s application to the Commerce Commission to buy Hirequip. Those figures included an estimate that the building hire industry generated $780 million of equipment hire revenue in 2013, while Hirequip’s revenue was $153 million.
The company had planned to cut interest bearing debt to $85 million on listing from $203.6 million at June 30.
Additional reporting from Businessdesk