The IPO of Talecris, the blood plasma group which has been trying to pluck up the courage to float for the last 12 months, appears to be back on.
Yesterday, the group filed initial documents with the SEC, stating its intention to tap the equity markets for cash. The credit crunch derailed its plans six months ago, but now the heavily indebted group appears to believe the time is right. Actual figures are thin on the ground, but last time it wanted to raise $1bn, a number that is unlikely to be much smaller this time round, given its cash requirements.
The group was bought from Bayer by private equity firms Cerberus and Ampersand in 2005, and since then has been saddled with $1.3bn in debt. The first $325m tranch is due at the end of 2011, a further $700m at the end of 2013 and $330m a year later.
Some of the cash will no doubt go towards paying that down. In the IPO document, Talecris said it plans to float so it can capitalise on rising prices for plasma products, improve profitability, expand its plasma collection platform, manage product life cycles and invest in protein therapies.
Expanding its collection centres is a crucial strategy for the group, as it wants to source its own supplies, rather than having to buy from a third party. In the last few years its network has been significantly expanded through the acquisition of a national chain of plasma collection centres and the construction of its own. It now owns 53 centres, but significant investment is still required.
Whether investors have an appetite for that much debt remains to be seen. The group is profitable at least; in 2007 it generated net revenue of $1.2bn and net income of $123.6m, up 7% and an impressive 41% respectively, on the previous year.
The experience of Italian peer Kedrion, which pulled its float earlier this month citing lack of investor interest, could be taken as a bad sign. Like Talecris, it was profitable and operating in the same blood plasma area, viewed as much lower risk than the typical biotech business model, but still could not persuade investors to value the company as highly as it wished.
Admittedly, Kedrion was only floating a small percentage of its share capital, and is a much lower profile company, so comparisons are only fair to a point. However, combined with the fact that only five life science companies have successfully floated this year, the investment community is not likely to be hugely welcoming, and its backers are probably feeling nervous.
Rumours have been abounding that the current owners are also looking for a buyer, as an alternative exit route. A rare press release in June, highlighting the group’s progress in building blood collecting centres, stoked talk that Talecris was touting its wares.
Private equity have owned the company for three years, a typical period of time before seeking an exit, having bought the operations for $300m. If the IPO gets away in these lean times, it will be interesting to see how much value the market believes has been added in the intervening years.