Stock Market and Initial Public Offerings and Public Companies and Allison Transmission and Banking & Finance and ExactTarget and Investing and Angie's List and Manufacturing & Technology and Technology

Dynamics in place to mint public companies aplenty

March 17, 2012

Suddenly, the ranks of Indianapolis public companies are getting replenished in a hurry.

Since the late 1990s, the region has seen the acquisition of some of its highest-profile public companies, from Arvin Industries and IPALCO Enterprises to Central Newspapers and First Indiana Corp.

But things have begun to turn around, starting with Angie’s List Inc.’s $108 million initial public offering in November. Allison Transmission Holdings Inc. went public March 15, raising $600 million, and ExactTarget is expected to stage its debut within days, likely raising $145 million.

Meanwhile, a Securities and Exchange Commission filing this month shows Remy International Inc. has dusted off its IPO plans and intends to raise $100 million. It had begun the regulatory-approval process in March 2011 but put it on hold last summer.

The new filing shows the Pendleton-based company, a maker of electrical components for vehicles, now has more to entice investors—including its first annual profit since restructuring in bankruptcy court in 2007. After losing nearly $14 million in 2010, the company earned $62 million last year on revenue of $1.2 billion.

Indianapolis attorneys say numerous local private firms are on the IPO sidelines, mulling whether to try to capitalize on the strengthening economy and improving investor appetite for new issues. The FTSE Renaissance IPO Composite Index is up 19 percent for the year, far outpacing the advance of the S&P 500.

Many of the most promising local candidates are venture-capital backed firms in the life sciences and IT, said Marcus Chandler, chairman of the entrepreneurial services group at the Indianapolis law firm Barnes & Thornburg.

“With the stock market doing as well as it is, it has excited the venture capitalists who were positioning for an exit strategy,” Chandler said.

He wouldn’t identify companies. But asked if any of the firms would be filing for IPOs this year, he said, “I would guarantee it.”

Market watchers say private-equity firms that scooped up Indiana companies before the market crash also may take the IPO plunge. One candidate could be Marsh Supermarkets Inc., which was a public company until Florida-based Sun Capital Partners snatched it up nearly six years ago—a fairly long holding period by private-equity standards.

“There is a lot of pressure on principals on these PE firms,” said David Menlow, president of IPOfinancial.com in Green Brook, N.J. “They have their own shareholders they have to satisfy.”

A Marsh spokeswoman said the company would not comment on whether it is considering an IPO. But Marsh officials can’t help but notice that another regional Midwestern grocery chain, Milwaukee-based Roundy’s Inc., successfully staged one in February.

Internet companies have been among the hottest IPOs, with investors willing to overlook steep losses if firms are spending big to build market share in potentially lucrative niches.

Angie’s List is a textbook case. The market value of the provider of online business reviews has swelled to $646 million, even though the company has lost $135 million since the beginning of 2006.

ExactTarget, an e-mail and social media marketing company, appears poised for a similarly warm reception. In 2011, the company boosted revenue 54 percent, to $207 million, but also lost $35 million. ExactTarget expects to sell shares for at least $15 apiece, which would value the overall business at nearly $1 billion.

Industrial companies can’t touch the growth of high-flying technology firms. But they can boast of something more concrete—real profits.

After narrowly returning to profitability in 2010, Allison Transmission last year earned $103 million on $2.2 billion in revenue.

Both Allison and Remy suggest in their filings that even larger profits lie ahead, as the automotive industry continues its rebound.

“In 2010 and 2011, U.S. vehicle production improved, but was still less than the average for the period during 2000 to 2007,” Remy said in its filing last month.

Biglari ups Cracker Barrel ante

Shareholders of Cracker Barrel Old Country Store Inc. late last year shot down Sardar Biglari’s bid to join the Tennessee company’s board. But a new regulatory filing shows the slender activist investor isn’t going away quietly.

The filing says affiliates of Biglari Holdings Inc., the San Antonio-based parent of Indianapolis-based Steak n Shake, scarfed up $4.6 million in Cracker Barrel stock earlier this month. The affiliates—Cracker Barrel’s biggest shareholders—now own a nearly 16-percent stake in Cracker Barrel worth nearly $200 million.•

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