Apollo portfolio company debuts below offering price

Share prices for Apollo Management portfolio company Verso Paper dropped sharply after the company’s initial public offering on the New York Stock Exchange yesterday.

Verso has originally planned to offer 18.75 million shares at a price between $16 (€10.3) and $18 a share. The adjusted initial public offering was announced by the company on 14 May. Verso offered 14 million shares at $12 apiece, granting the underwriters an option to purchase an additional 2.1 million shares of common stock.

After debuting at approximately $10 a share, the stock rose to a high of just under $11 dollars and is now hovering in the mid-$9 range.

Credit Suisse Securities and Citigroup Global Markets acted as joint bookrunning managers for the offering and Deutsche Bank Securities, J.P. Morgan Securities, Lehman Brothers, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley and Utendahl Capital Partners acted as co-managers.

Money raised in the IPO will be used by Verso to repay debt, according to the company.

Apollo acquired the coated papers division of International Paper in August 2006 for $1.4 billion. Prior to the IPO, the private equity mega-firm held 89 percent of the company, International Paper held 10 percent and management held 1 percent.

Memphis, Tennessee-based Verso is a North American producer of coated papers used primarily in media and marketing applications. The company posted profits of $4 million on sales of $454 million in the first quarter of this year.

Another Apollo portfolio company, Noranda Aluminum, filed for an IPO one week ago and Apollo itself filed a $418 million IPO last month.

In addition to the disappointing performance of Verso, portfolio company Linens ‘n Things filed for Chapter 11 bankruptcy protection earlier this month.

Apollo is currently raising its seventh fund targeting $15 billion. As of April, the fund had raised $12.5 billion, as revealed in a securities exchange commission filing.