Boise IPO Comes at Difficult Time

The finicky U.S. market for initial public offerings could pose a challenge for this week’s largest deal, the $400-million IPO of paper and forest products company Boise Cascade Co.

The name is a familiar one to investors, but the Boise Cascade that is going public is a restructured version of the old one. This time, it is controlled by a private equity company.

That may not sit well with investors, who analysts said are increasingly skeptical of IPOs that are a means for private equity firms to quickly flip their investments.

“Getting involved in these companies really involves passing money upstream. Investors want to give money to the company so it can grow. This doesn’t allow them to grow. This is just a financial transaction that is all about paying down the equity investors,” David Menlow, president of IPOfinancial.com, said about private equity-backed deals.

That skepticism was illustrated with Warner Music Group Corp.’s IPO last week, which came about a year after it was purchased by a group of private equity investors from Time Warner Inc. for $2.6 billion.

The record company’s offering was dogged not only by analysts saying it was overpriced but also by the fact that the IPO funds went toward paying down debt related to the acquisition.