KAR Auction skids on its IPO

Posted Dec 11th 2009 3:00PM by Tom Taulli
Filed under: Goldman Sachs Group (GS), Initial Public Offerings

As the IPO market winds down for the year, activity has mostly been lackluster. Just take today's offering from KAR Auction Services.

With an initial price range of $15-$17, KAR was only able to get its deal done at $12. In all, the company sold 25 million shares. The lead underwriters on the deal included Goldman Sachs (GS) and Credit Suisse (CS).

Then again, KAR is in a challenging business; that is, auctions for used and damaged vehicles. The company does this through 214 locations as well as a website.

Despite the economic headwinds, KAR still has been able to post decent numbers. For the year ended September 30, revenues reached $1.7 billion and adjusted EBITDA was $383.7 million. Moreover, if the economy improves in 2010, this should help pump-up revenues and profits for KAR.

True, the company has $2.5 billion in debt (a big reason is the buyout from a group of private equity firms). But with the IPO proceeds, this burden will be less of a problem.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: inthenews, IPOs, KAR Auction Services, KarAuctionServices