IFR International - 28.07.2018

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CATALENT FUNDS WITH EQUITY

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acquisition of UK-based Juniper
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Antibiotics specialist NABRIVA THERAPEUTICS

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announcing its acquisition of Zavante

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shareholders and is using proceeds to

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National Vision is doing its part to support

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comparable year-ago period, on revenue of

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ELI LILLY PUTS SPIN ON ANIMAL

HEALTH UNIT

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queue by announcing plans to spin-off its

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The pharma giant combined the spin-off

with other shareholder treats of strong

second quarter earnings and plans to

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Henry Schein has jettisoned its vet subsidiary in

a spin-and-merge transaction that will net it

Berry Petroleum sours on IPO

„ US Investors pick apart formerly bankrupt oil producer

BERRY PETROLEUM, the one-time subsidiary of

bankrupt Linn Energy, weathered a tough slog

on its reintroduction to the public markets.

Former creditors of the Californian E&P

responded in-kind by opting to scale back their

planned selling in the IPO.

Goldman Sachs, Wells Fargo and BMO Capital

Markets, the lead bookrunners, sought to broker

a deal on Wednesday morning, the last day of

the IPO bookbuild.

Instead of 18.75m shares, including 6.55m

by selling shareholders, the offering would

be reduced by 30%, and pricing was likely to

come at between US$14 and US$15, versus the

US$15–$17 range marketed.

They were oversubscribed, albeit with price

sensitivity, but some of the secondary sellers

were unwilling to participate at the lowered

valuation.

“I call it low-hanging fruit,” said one banker of

investor pushback. “[They said] ‘Wrong part of

the cycle. Sponsor overhang. Not a big enough

market cap’.”

Pricing on a downsized 13m shares (10.5m

primary and 2.5m secondary) was set at US$14

apiece, valuing Berry at a rough US$1.1bn market

cap and US$1.4bn enterprise value.

That equates to a low-4s multiple of EV/Ebitda

for 2019 from underwriting bank estimates.

Berry shares plunged 8.6% on debut to close

on Thursday at US$13.25.

Linn, for perspective, paid US$4.6bn in stock

and assumed debt for Berry back in 2013, but was

forced to seek bankruptcy protection in May 2016.

INCENTIVES

Berry, which emerged from bankruptcy in

February 2017, sought to provide investors with

assurances.

As a show of capital discipline, it would pay

shareholders a 12-cent quarterly dividend, a

3.4% annual yield at offering.

Moreover, net debt leverage would be

maintained at 1.5–2.0 times throughout the

cycle.

Berry spent a portion of the proceeds raised

on the IPO to buy back 1.8m shares from former

creditors Benefit Street Partners and Oaktree

Capital, scaled back from 4.2m.

Berry did pump out US$24.6m of free

cashflow in the first quarter, so it does have the

ability to remain disciplined.

“The reality is there are a lot of E&Ps

trading at low-4s 2019 multiple,” a second

banker involved in the underwriting told IFR.

“Valuations just aren’t that attractive.”

Jagged Peak Energy, a Permian Basin

producer, was the last C-Corp E&P to go public

in January 2017.

Berry did achieve ancillary benefit of flushing

37.7m Series A convertible preferred shares that

could be PIK’d into common stock.

Stephen Lacey