IPO Watch: Safe Bulkers

Rating:

(NYSE:SB)
Priced on May 28
$190 million proceeds
$378.4 million post-money valuation

Safe Bulkers operates a fleet of 11 ships used to carry dry bulk, which is uniform cargo that can be stored in loose piles such as grain or iron ore. To get it from place to place, shippers use dry-bulk ships, and Safe Bulkers is one of the fleet operators they call. The company’s ships have an average age of 2.6 years, making it one of the youngest fleets in the industry. The company’s largest customer is agribusiness company Bunge Limited (NYSE:BG), which contributed 29.9% of 2007 revenues. Another agribusiness firm, Cargill International, represented 21.1% of revenues, and Daiichi Chuo Kisen Kaisha, a shipping company, was responsible for 18.2% of sales. That’s a total of 69.2%, a proverbial blessing and curse. Safe Bulkers has most of its fleet time accounted for, but the loss of one of those customers would be devastating.

Operating the ships uses a lot of capital, but the business makes money. In 2007, Safe Bulkers posted net income of $87.8 million on revenue of $161.1 million. Cash provided by operating activities was $278.5 million. The ships need ongoing maintenance, but they also have value; Safe Bulkers historical financial results often include gains from sales of ships.

The company is owned by Vorini Holdings, an investment firm controlled by the Hajioannou family of Greece. Vorini sold all of the stock in this offering, and will still control more than 80%. The company itself did not get any of the proceeds. Nevertheless, Safe Bulkers has plans to expand its fleet to 19 ships in the next two years. The filing range was $20 to $22, so the $19 price was a little disappointing. Except, of course, that the deal actually closed. Not too many bankers can say that these days.

Revisiting Recent IPOs:

Once again, the calendar of deals is light, and many filed deals have been pulled. Liberty Lane, the SPAC featured here a few weeks ago, is one of the victims. With nothing new on the horizon, I thought it might be interesting to see how some of the other featured deals in 2008 have fared.

Colfax Corporation (NYSE:CFX), www.colfaxcorp.com; priced May 7, 2008; $336 million gross proceeds; $742.1 million post-money valuation: Colfax Corporation has a dull product: pumps. But not only does it make good money on each pump sold, demand is increasing as huge parts of the world build infrastructure. In 2007, it earned $64.9 million in net income on $506.3 million in sales. The IPO was priced at $18 per share, above the $15 to $17 filing range. The stock is now trading above $24.

American Water Works (NYSE:AWK), www.amwater.com; priced April 22, 2008; $1.2 billion gross proceeds; $3.3 billion post-money valuation: American Water Works is a company selling a necessary product and generating tremendous amounts of cash for doing so. Reported earnings have not been so good, but that seems due to some accounting sleight of hand by the company’s parent, RWE Holdings, which still owns about 60% of the shares outstanding. The deal was priced at $21.50, below the $24 to $26 filing range; the stock is now slightly below the IPO price.

Visa (NYSE:V), www.visa.com; priced March 18, 2008; $17.8 billion proceeds; $34.3 billion post-money valuation: Visa would be considered a successful IPO in any year, but it really stands out in 2008. The prospectus included aggressive assumptions for the size and valuation, but when it came time to price the deal, the $44 price exceeded the $37 to $42 filing range. Even better, the largest IPO in the United States to date is one of the best-performing stocks for the year, now trading at $85.25.

Mako Surgical (Nasdaq:MAKO), www.makosurgical.com; priced Feb. 14, 2008; $50.1 million gross proceeds; $201.1 million post-money valuation: This deal probably should not have gotten done, but it did. MAKO is developing a robotic system for resurfacing knees, which may reduce the need for total knee replacement surgery. The potential market is huge, but MAKO still needs to convince the medical community to try it out.

About the Author
Ann C. Logue is a freelance writer and a lecturer in finance at the University of Illinois at Chicago. Read More

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