Party City Holdco Inc. (NYSE:PRTY) is bringing a celebration filled with confetti, birthday balloons and colorful costumes to Wall Street. The largest U.S. party supplies retailer will make its stock market debut Thursday with an initial public offering that could value the company at nearly $2 billion. Shares of the company’s stock are set to trade on the New York Stock Exchange and will be priced at $17 per share, the high end of its previous range of $15 to $17 per share.
If the company sells all 21.9 million shares in the IPO, it could raise as much as $372 million.
The Rockaway, New Jersey, company is North America’s largest wholesaler and retailer in the $10 billion retail party goods industry, operating 850 superstores in the U.S., including 215 franchises.
This week’s offering is its second attempt at going public. In 2011, it filed for an IPO that never happened. The following year, Party City agreed to a $2.69 billion buyout from private-equity firm Thomas H. Lee Partners.
Although many retailers have struggled to keep up with online establishments, Party City --which reported net income of $56.1 million on revenue of $2.27 billion for 2014 -- occupies a unique niche, says Jay Ritter, a finance professor and IPO expert at the University of Florida.
“When it comes to retailers like Party City, buying things in the store will continue to be the norm because shipping costs are much too high,” says Ritter.
Founded in 1947, Party City first started as an importer and wholesaler and grew to offer a broad selection of decorated party supplies from over 100 countries. Its selection includes metallic balloons, novelties and costumes for themed and festive occasions, such as Halloween, birthday parties, bridal showers or even a Cinco de Mayo bash.
The company opened its first store in East Hanover, New Jersey, in 1986. Party City Corporation was acquired by Amscan Holdings Inc. in 2005, effectively combining the largest retailer of party goods with the leading manufacturer and distributor of party supplies.
A key part of Party City’s growth in the last decade has been though aggressive acquisitions. With the purchase of Party America in 2006 and Factory Card & Party Outlet in 2007, Party City became the largest party goods retailer in America.
Party City made its first move outside the U.S. in 2012 by acquiring the Canadian chain Party Packagers, making the company the leading party supplies retailer in all of North America with its 30 locations in Canada.
As part of the company’s growth strategy, it plans to open more than 350 additional Party City stores in North America and expects to open 30 new stores in the U.S. and Canada, according to its S1 filing with the Securities and Exchange Commission.
However, investors are facing a key risk: The company had a debt load of more than $2 billion as of Dec. 31. The majority of that debt was incurred in 2012 when private-equity firm Thomas H. Lee Partners acquired a 69 percent stake in Party City for $2.7 billion from private equity peers Advent International Corp., Berkshire Partners LLC and Weston Presidio in 2012.
Thomas H. Lee Partner’s stake will be diluted to around 56 percent after the IPO if the underwriters do not exercise their option.
The lead underwriters for the IPO include Goldman Sachs Group Inc., Bank of America Corp. and Credit Suisse Group AG.