Is The IPO Market Back? US Foods Holding Corp. (USFD) Shares Soar In Second Largest Stock Offering Of 2016

Shares of US Foods Holding Corp., a U.S. food distributor primarily owned by private equity players, were up 6 percent at $24 when the company made its stock market debut Thursday.

US Foods raised $1.02 billion Wednesday in the second-largest U.S. initial public offering this year, as new stock market flotations have picked up the pace.

The US Foods IPO was second only to the real estate investment trust MGM Growth Properties’ $1.2 billion offering last month. The food distributor’s path has been closely followed by buyout firms because it is the first major leveraged buyout to go public since stock market jitters put such debt-laden offerings on ice at the end of last year.

The IPO offered US Foods’ private equity owners — Clayton, Dubilier & Rice and KKR — a way to sell shares in the company after their attempted outright sale of the firm to larger peer Sysco Corp. for $8.2 billion, including debt, fell apart when the U.S. Federal Trade Commission moved to block it last year. US Foods was valued at roughly $5.1 billion in its IPO, including debt.

Two other private equity-owned, albeit much smaller, companies priced their IPOs Wednesday. Cotiviti Holdings, owned by Advent International, raised $237.5 million, while GMS, owned by AEA Investors, raised $147 million.

US Foods priced 44.4 million shares at $23, within its previously indicated $21 to $24 range, the company said in a statement.

For its 2015 fiscal year, US Foods reported about $23 billion in revenue and adjusted earnings before interest, tax, depreciation and amortization of $875 million, according to its IPO prospectus. It has roughly $5 billion in debt, and it will use the offering’s proceeds to help pay that down.

Last year, several highly indebted IPO aspirants were given the cold shoulder by investors. Grocery retailer Albertsons and luxury retailer Neiman Marcus Group delayed their offerings, while U.S. payment processing company First Data downsized its offering. When credit markets are weak, investors have concerns about a company’s future ability to efficiently pay down debt.

US Foods is only the third private equity-backed IPO to have raised more than $1 billion since the beginning of 2015.

Clayton, Dubilier & Rice and KKR bought US Foods from European grocery Royal Ahold NV in 2007 in a transaction valued at $7.1 billion.

Based in Rosemont, Illinois, US Foods listed its shares on the New York Stock Exchange under the ticker symbol USFD Thursday.

Goldman Sachs Group, JPMorgan Chase and Morgan Stanley are the joint representatives of the underwriters of the IPO.

Data from Reuters were used to report this story.