Big 5 Plans IPO, Aims for $115 Million
Betting that investors’ appetite for new stock offerings will pick up in coming months, Big 5 Sporting Goods Corp. has filed for an initial public offering, hoping to raise as much as $115 million.
The El Segundo-based company, which owns more than 200 stores selling athletic apparel and equipment in the Western U.S., filed with the Securities and Exchange Commission for what would be the second sporting goods IPO this year.
Though the overall IPO market still lags behind last year’s pace, observers said signs point to some improvement, especially for companies with strong finances.
Big 5 reported in the filing Tuesday that its net income more than doubled to $5.9 million in the six months ended July 1, from $2.7 million in the year-earlier period. Sales rose 10% in the period to $294.6 million from $267 million.
“Our sense is that the company has performed pretty spectacularly, and that the market, while not terrific, will recognize that performance,” said Jon Seiffer, a partner at Leonard Green & Partners, a Los Angeles corporate buyout firm that owns about one-third of Big 5.
The Big 5 filing did not give a price range or a target date for the proposed offering.
An analysis by IPO Monitor shows that 13 companies are slated to go public in September. That would make it the second strongest IPO month this year.
“I think that shows that there is still optimism in the market, that underwriters still feel they can bring out all of these deals,” Jeff Stacey, managing director of IPO Monitor, said Wednesday. “People are still hopeful that the market will recover.”
The IPO market overall has collapsed this year as technology stocks--IPO investors’ favored shares in 1999 and 2000--have continued to plummet, making it all but impossible for most tech-related private firms to issue stock.
Some non-tech IPOs have fared well, however. But the performance of this year’s first sporting goods IPO has not exactly been stellar, analysts note.
After gaining about 7% in its first day of trading in June, shares of Indiana-based Galyan’s Trading Co. dropped by more than 40% in subsequent trading.
The sporting goods company took its opening bow June 26 at $19 a share and closed Wednesday at $11.04 on Nasdaq.
Galyan’s was one of two companies taken public this year by Freeman Spogli & Co., a Los Angeles buyout firm with $1.5 billion under management. The other was AFC Enterprises, an Atlanta-based restaurant chain operator that includes Popeyes Chicken & Biscuits and Church’s Chicken.
Despite Galyan’s slide, going public now is “not a bad strategy,” said Ron Spogli, a partner in the buyout firm. AFC Enterprises shares, which sold at $17 each in the firm’s IPO in March, closed at $22.70 on Nasdaq on Wednesday.
Leonard Green & Partners also recently announced plans for an initial stock offering by its Veterinary Centers of America unit.
Overall, analysts say, the athletic goods industry is rebounding after retracting from a glut of stores last decade, fueled in part by a string of IPOs in the early 1990s.
Several firms filed for bankruptcy, including JumboSports Inc. in 1998, while other competitors merged. Most recently Oshman’s Sporting Goods was acquired by Gart Sports Co. of Denver. Gart also is controlled by Leonard Green & Partners.
“The sporting goods industry is certainly improving, and Big 5 is a niche player in the business,” said Steven Richter, an analyst with Tucker Anthony Sutro Corp. in Boston.
Big 5 offers a broad line of sports equipment, though Richter said its greatest advantage is a strong share of the market for mid-priced shoes, $40 to $80 a pair. “There’s a fair amount of growth in there,” he said.
Big 5, started in 1955 by Maurie and Harry Liff and by current Chairman Robert Miller, was known as United Merchandising Corp. It sold World War II surplus, tents, sleeping bags, and other items, later expanding its line and changing its name to Big 5 in 1963.
The company hired Credit Suisse First Boston Corp. to underwrite the stock sale, with U.S. Bancorp Piper Jaffray Inc., Jefferies & Co., and Stephens Inc. Big 5 plans to list the shares on the Nasdaq Stock Market under a symbol to be decided later.
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Bloomberg News was used in compiling this report.
