SeaWorld Entertainment, Inc. Market Cap (as of May 4th 2013) : $ 3.1bn
The Blackstone Group , AUM (as of May 4th 2013) : $ 218.0bn

On the 19th of April SeaWorld Entertainment opened for trading on the NYSE under the thicker symbol “SEAS”. The initial public offering of 29.9 million shares had a starting price of $27 per share, at the top of its expected price range of $25-$27 per share. The IPO closing was announced on the 24th of April, and the company raised a total amount of $702 million. At the initial price the company is valued $2.5 billion.

In the offering SeaWorld Entertainment issued and sold 10 million shares of common stock and selling stockholders affiliated with The Blackstone Group L.P. offered and sold 19.9 million shares of common stock, including 3.9 million shares that were offered and sold by the selling stockholders pursuant to the full exercise of the underwriters’ over-allotment option. The offering raised proceeds to the company of $253.8 million, after deducting underwriting discounts and commissions.  SEAS used approximately $46.3 million of the net proceeds from the offering to make a one-time payment to an affiliate of Blackstone and it is also planning to pay to its investors a dividend of 20 cents a share starting this quarter.

The company is highly leveraged, with $1.83 billion of long-term debt and a net debt over ebitda of 4.53. Nevertheless, the IPO was successful, and the price raised more than 25% to nearly $34 a share on its first day of trading. Investors are likely attracted by the promised 3% annual dividend, but also confident in the improvement of the economy and in the ability of the company to stay competitive.

Blackstone bought SEAS from Anheuser-Busch for $2.3 billion in 2009, putting 1.01bn in cash and financing the rest.  After the IPO the private equity firm has maintained the control of the company, with a stake of 63%. In the last years under private equity ownership, SeaWorld has increased its operating income from 58 million in 2010 to 228.69 million in 2012, with a substantial improvement in efficiency and reduction of costs. The net income also rose constantly over the period from a loss of 45 million in 2010 to a profit of 86 million in 2012.

For Blackstone the transaction is the beginning of the exit from the investment, after it failed to find a buyer offering an attractive price on the private market. As proceeds of the IPO, in addition to the sale of 19.9 million shares at a price of $27 per share, Blackstone will also make about $2.1 million for its role as an underwriter. At the actual values, the IRR has been estimated to be 37%, but a certain percentage of equity is still retained (63%) and will be available for future placement, allowing Blackstone to enjoy the potential upside of the now listed company’s stock.

 

Goldman, Sachs & Co. and J.P. Morgan acted as joint bookrunning managers and as representatives of the underwriters in the offering. Citigroup, BofA Merrill Lynch, Barclays and Wells Fargo Securities were also bookrunners. Blackstone Capital Markets, Lazard Capital Markets, Macquarie Capital, KeyBanc Capital Markets, Nomura, Drexel Hamilton, LLC and Ramirez & Co. Inc. acted as co-managers.


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