US$440m from an upsized overnight
primary block trade to repay debt late on
Tuesday.
The block saw Sun sell 4.4m shares to a
syndicate of banks that reoffered their
purchase at US$100.10, the bottom of a
US$100.10–$101.90 reoffer range and a 2.7%
discount to last sale.
The offering was increased in size from
4m shares at launch and represented 5.2% of
its expanded common stock outstanding.
Citigroup, Bank of America Merrill Lynch, BMO
Capital Markets and RBC Capital Markets led the
offering.
The shares closed down 1.9% at US$100.90
on Wednesday, the session after pricing.
Sun recently reported 7.2% same
community net operating income growth in
the second quarter, its 23rd consecutive
quarter of mid-to-high single-digit growth.
The REIT also raised its 2018 funds from
operations guidance by 7 cents at the
midpoint to US$4.57–$4.63 a share.
Sun last sold equity in May last year when
an underwriting syndicate paid US$84.68
apiece for 4.2m shares, but it has also sold
shares through an at-the-market
programme.
Buyers in the offering will be able to
collect Sun’s already declared 71 cents a
share third-quarter dividend, which will be
paid on October 1 to shareholders of record
on September 14.
On the same evening, net lease retail REIT
AGREE REALTY priced a US$193m block trade at
the low end of the reoffer range.
Agree sold 3.5m shares at US$55.20 versus
the US$55.20–$55.75 range and a 2.5%
discount to last sale.
Citigroup and Jefferies led the offering.
Though Agree did not increase the size of
the deal (unlike Sun) and deferred dilution
by structuring the offering as a one-year
forward sale, the shares took a hit in
Wednesday’s aftermarket, closing down
3.9% at US$54.38, below the reoffer price.
Though retail REITs have underperformed
the overall REIT complex this year, free-
standing/net lease retail REITs like Agree
produced a total return of 9.4% through
August 31 (per NAREIT numbers), bettering
the 4.3% return of all equity REITs and the
1.8% return of retail REITs.
If Agree takes the cash upon settlement of
the forward sale, it plans to use the proceeds
to fund acquisitions and developments and
reduce its outstanding US$325m revolver.INSIDER SALE TRIGGERS TILLYS SLUMPA share price slump forced youth apparel
retailer TILLYS to slash by nearly one-third
the size of a long-awaited secondary stock
sale that allowed its co-founders to reduce
their stakes.After two days of marketing, sole
bookrunner Bank of America Merrill Lynch
priced the downsized sale of 5.5m Tillys
shares at US$18.50 each, for a massive
all-in discount of 26.4%.
The offering generated gross proceeds of
US$101.8m for sellers Hezy Shaked and
Tilly Irvine.
They will maintain voting control of
Tillys through their ownership of
supervoting Class B shares, but their
combined economic interest fell to 44%
from more than 60% previously.
The offering was their first opportunity
to sell a large number of shares in an
organised offering since the company’s
IPO in 2012.
The deal’s size was cut by more than 32%
from 8.1m shares at launch - little surprise
after Tillys shares tumbled 21.5% from
US$25.14 to US$19.73 during the
marketing period.
The shares continued to struggle in
Friday’s aftermarket session, falling 2% to
US$19.34 but at least holding above the
offering price.
The earlier stock slump was partly a
function of the large size of the original
deal, at about a quarter of Tillys shares
outstanding, and partly a response to the
stock’s unseasoned 40% surge in the week
before the deal was launched.
The retailer’s 2012 IPO priced at
US$15.50 but until a recent spike, the
stock had spent virtually the entire period
since its debut below this mark. The shares
traded below US$5 a share at their nadir in
August 2016.
Yet shares in Tillys soared in late August
after the company reported a “beat-and-
raise” quarter that included 4.4% comp store
sales, its strongest result since the third
quarter of 2016.
The company is also forecasting a 3%-6%
increase in comp sales in the current
quarter.
Tillys now has 226 stores in 31 states, of
which half are in malls.
The company opened 91 stores between
2012 (just after the IPO) and 2015, but later
blamed poor brand awareness in new markets
and inconsistent merchandising for declines
in traffic, sales and operating margins.
Edmond Thomas, previously the
company’s co-CEO from 2005 to 2007,
rejoined the company in 2015 and led its
improved fortunes by slowing new store
growth and improving merchandising
selection and inventory management.
Some big special dividends in recent
years – US$1 a share in February this year
and 70 cents a share in February last year –
have helped to smoothe the stock’s
comeback, although the founders were the
big beneficiaries.With net cash now at US$4.20 a share,
some investors are hoping another big
payout is in the offing.KLEIN INCLINED TO SCALE SPAC DEBUTCHURCHILL CAPITAL, the Michael Klein-backed,
Jerre Stead-run SPAC, went big landing a
mammoth US$600m on its IPO on
Thursday that was increased in size twice.
Citigroup, sole bookrunner, launched the
public roadshow at US$450m, above the
US$400m target on the initial filing, before
hiking to US$600m on Thursday afternoon
ahead of pricing.
Exercise of a 15% greenshoe would
increase total funding to US$690m,
matching the US$690m raised in June by
Goldman Sachs’ GS Acquisition, the year’s
largest SPAC IPO, and surpassing the
US$625.5m of Far Point Acquisition.
The outcome is almost entirely
attributable to management rather than
any structural nuances.
Citigroup, which added B Riley as co-
manager late in the process to help satisfy
listing requirements, placed 60m units at
US$10.00 apiece. Each unit consists of one
share of common stock and one-half
warrant exercisable at US$11.50 per full
warrant, a standard construct.
Churchill traded at midday on Friday at
US$10.05.
Notably, 100% of the proceeds will be
held in trust, after including US$16m of
“at-risk” capital invested by sponsor M
Klein and Company, the M&A adviser
founded in 2012 by former Citi chairman
and co-chief executive of markets and
banking Michael Klein.
In addition to Klein, Churchill CEO Jerre
Stead brings plenty of experience, having
orchestrated the build-up of IHS Markit
over a 13-year tenure and previously
headed five other companies.
Stead, along with Klein and other
management, will focus their search on
information services with a specific focus
on predictive analytics and data.THREE-PEAT
Serial entrepreneurs are common to SPACs.
GORE GROUP, the Californian private
equity firm, secured US$375m for GORES
HOLDINGS III, its third vehicle, on Thursday
and managed to extract a small concession
in the process.
Deutsche Bank, sole bookrunner, placed a
full-sized 37.5m units at US$10.00, with
each unit comprised of one share and one-
third of a warrant exercisable at US$11.50
per full warrant, a more investor-friendly
(less dilutive) construct than Churchill.
Gores III traded to US$10.16 on debut on
Friday.94 International Financing Review September 8 201810 Equities and SE 2250 p81-98.indd 94 07/09/2018 20:19:33