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Edgen Tapping an IPO for More Energy

Several positive trends bode well for the energy products supplier


Between the Internet and mobile technologies, it looks like distributors are an endangered species. But the fact is there still are many growth opportunities in the business.

One example is Edgen, a company focused on the energy sector that recently filed to go public in hopes of raising as much as $100 million. Edgen’s underwriters include Jefferies (NYSE:JEF), Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C), and the proposed ticker symbol is “EDG,” which likely will list on the New York Stock Exchange.

Edgen’s distribution network includes steel pipes, valves and heavy plates. Its focus is on premium offerings, which often are for mission-critical applications.

Over the years, Edgen has built a global platform that includes relationships with more than 800 suppliers and operations in 14 countries. Key areas include the U.S., U.K., Singapore and Dubai.

Edgen is more than just a central place for purchasing. The company also provides help with logistics, delivery and fabrication. It also has expertise in bundling products from multiple suppliers and getting discounts on bulk purchases, which can be a big value add for customers.

For the first nine months of 2011, Edgen reported sales of $1.2 billion but posted a $3.6 million loss. However, the company was able to generate pretax earnings of $91 million.

Going forward, Edgen should benefit from some positive trends. For example, active drilling for unconventional sources of energy — such as natural gas — has increased demand for equipment. There also is strong growth for development in the Canadian oil sands and global deepwater drilling, such as off the shores of West Africa and Brazil. At the same time, more countries are boosting their environmental and safety requirements, which should mean more investments in high-end products.

To scale its operations, Edgen has been an aggressive acquirer. Since 2005, the company has struck roughly $360 million in transactions. Of course, with an IPO, Edgen will be in an even better position to ramp up its dealmaking — a likely must for future success.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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