Party City recap could cancel IPO

Party City’s $2.69bn recapitalisation translates into a 65% stake for THL. Advent International, Berkshire Partners, Weston Presidio and management will retain a 35% stake.

Thomas H Lee has taken a 65 percent stake in costume and party supplies store Party City in a deal that may nix the company’s plans to go public, according to a source with knowledge of the deal. 

The firm participated in a $2.69 billion recapitalisation of the company that was financed through a combination of equity and debt. It is unclear how much equity was provided by the firm. Existing stakeholders Advent International, Berkshire Partners, Weston Presidio and management will retain a 35 percent stake of the company, the source said. 

Party City filed a prospectus for an initial public offering in April. At the time, funds managed by Advent held 37.12 percent of the company, Berkshire held 36.15 percent and Weston Presidio held 17.45 percent. Following the recapitalisation, there are no plans to take the company public at this time, the source said. 

THL, Weston Presidio and Berkshire could not be reached at press time. Advent International declined to comment. 

Weston Presidio and Berkshire acquired Party City in 2005 in a $360 million take private. The company was paired with party goods maker Amscan under the firms’ AAH Holdings acquisition vehicle. 

The firms had been attracted by the level of discretionary spending that was taking place in the economy at the time, and believed consumer interest in the company’s products would expand beyond the busy holiday season. 

“Our data suggests consumers are going to continue to throw parties,” Berkshire principal Mike Ascione told Private Equity International at the time. “But they have more discretionary dollars to spend, and there’s also been a proliferation of products that have been made available, so they can now buy supplies for graduation parties, the Fourth of July, a baby’s first birthday. There are more occasions to buy party goods, which has made this more of a year-round type of business.”

Three years later, Advent acquired a 38 percent secondary stake in Amscan Holdings, which is now classified as a subsidiary of Party City Holdings, according to Party City’s S-1. Terms of the deal were not disclosed at the time. 

Thomas H Lee is based in Boston. The firm has raised approximately $20 billion in equity capital has invested in more than 100 businesses, according to its website.