Apax-backed retailer files $125m IPO

The latest private equity-sponsored company to file an IPO is US retailer rue21, originally backed by Saunders Karp, a mid-market firm Apax absorbed.

Teen fashion retailer rue21, in which Apax Partners owns a 63.4 percent stake, plans to raise up to $125 million in an initial public offering.

Bank of America Merrill Lynch, Goldman Sachs, JPMorgan and Piper Jaffrey will underwrite the IPO, proceeds of which will be used to pay down the company’s some $29 million in debt, according to documents filed with the Securities and Exchange Commission.

The company operates 500 stores in 43 states and has plans to add 100 more stores next year.

rue21: the latest to file an IPO

Saunders Karp & Megrue, a US mid-market firm that merged with Apax’s US team in 2005, had owned a 50 percent stake in the company, previously known as Pennsylvania Fashions with subsidiaries including rue21 and Stock Room. The company filed for bankruptcy in 2002, re-emerging in 2003.

The rue21 registration is the latest in a series of IPO filings from private equity-backed companies. Some market participants caution, however, that not every company that files for an IPO will actually go public.

“It was not unusual in the past, and I suspect it will not be unusual in the future, to see parallel processes,” Mark Bergman, co-head of the securities and capital markets group at Paul, Weiss, Rifkind, Wharton & Garrison, previously told PEO.

Parallel or dual track processes, whereby the private equity sponsor simultaneously prepares an IPO and an M&A exit and then ultimately chooses whichever best suits it purposes, continue to be common, market participants say.

Apax has most recently been in the news for a reported $150 million loss on publishing company Incisive Media. Incisive is now controlled by lenders following a restructuring that addressed “issues arising from the debt finance” from Apax’s purchase of the company and subsequent add-on of American Lawyer Media, according to a statement.

Apax acquired its interest in Incisive after it led a £275 million management buyout of the business in 2006. Incisive has since made several acquisitions, including the purchase of US rival American Lawyer Media for $630 million in 2007. Its debt has been increased by more than seven times the amount it carried prior to the Apax takeover.