Party City, which is a retail chain of party supplies, has filed for an IPO. This is the second try at a public offering (the previous filing came in 2011). But given the strength in the markets lately, the odds for a successful Party City IPO look much better now.
Founded in 1947, Party City currently operates more than 880 locations. A key part of the company’s growth has been though aggressive acquisitions, which has helped to consolidate the fragmented industry.
But Party City also has its own design and manufacturing capabilities. As a result, the company has more control over quality, as well as opportunities to enhance margins. It also means it can distribute its products — which count more than 40,000 — to other retailers.
As should be no surprise, Party City has been investing heavily in its e-commerce platform (a big part of this was the acquisition of Party Delights). And it is getting some nice results. For the 12 months ended Sept. 30, 2013, sales came to about $100 million.
All in all, growth has been steady for Party City — a crucial necessity for the Party City IPO. From 2009 to 2013, revenues climbed from $1.5 billion to $2 billion, which translates into an annual compounded growth rate of 7.9%. But the company is losing money, posting a net loss of $52 million for the first nine months of 2013.
The company also sports a heavy debt load, at about $2.4 billion. The company agreed to a buyout from Thomas H. Lee Partners back in 2012, so a key reason for the Party City IPO will likely be to help pay down that debt.
As for the Party City IPO, the company plans to issue shares on the NYSE under the ticker symbol of “PRTY” and the lead underwriters include Goldman Sachs (GS), BofA Merrill Lynch (BAC), Credit Suisse (CS), Morgan Stanley (MS), Barclays (BCS), Deutsche Bank (BCS) and J.P. Morgan (JPM). The company did not provide any pricing terms for the transaction.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.