Reynolds Wrap maker jumps after raising US$1.2b in IPO

[SAN FRANCISCO] Reynolds Consumer Products Inc, the maker of Reynolds Wrap aluminum foil and Hefty trash bags, rose 9.8 per cent in its trading debut after raising US$1.23 billion in the biggest initial public offering by a household goods maker.

Reynolds, backed by New Zealand billionaire Graeme Hart's Rank Group, sold 47.17 million shares for US$26 each Thursday after marketing them for US$25 to US$28. The company's shares closed trading Friday at US$28.55, giving the company a market value of US$5.78 billion.

The offering is the first billion-dollar US listing of the year, as well as an unusual debut for a household goods maker. The IPO is the largest ever by a company in that niche, topping the 2014 Brussels listing by soap maker Ontex Group NV that raised 596 million euros (S$902 million) including the so-called greenshoe shares, according to data compiled by Bloomberg.

"What's attractive to investors about our company is steady proven growth over a long period of time," Reynolds chief executive Lance Mitchell said in an interview. "We have a very consistent, durable demand and investment thesis that's compelling."

The Reynolds listing is the biggest test so far this year of investor interest. 1Life Healthcare Inc, a provider of tech-driven primary care clinics under the One Medical brand, rose 58 per cent in its trading debut Friday after pricing its shares at the bottom of a marketed range to raise US$245 million.

Next week, drug and biotech research services provider PPD Inc is seeking to raise as much as US$1.62 billion in its IPO. Casper Sleep Inc, one of the leading brands in the so-called bed-in-a-box industry, also plans to go public, with a goal of raising US$159 million.

The offerings follow last year's tech-related IPO surge, led by Uber Technologies Inc's US$8.1 billion offering, that gave way to a largely disappointing second half.

Peloton, WeWork

Peloton Interactive Inc dropped in its trading debut in September, the same month as WeWork's share-sale plans were officially withdrawn after its spectacular flop. In November, Canadian waste management firm GFL Environmental Inc cancelled an IPO that targeted as much as US$2.1 billion.

Reynolds, based in Lake Forest, Illinois, was formed by Rank Group in 2010, primarily through a consolidation of the earlier Reynolds and Hefty businesses with Presto brands. Unlike many of the so-called unicorns that went public last year, Reynolds is profitable. For the nine months ended Sept 30, it had net income of US$135 million on revenue of US$2.1 billion, according to its filings.

The company's products are used in 95 per cent of US households, according to its filings. Hefty trash bags and related wares accounted for about 39 per cent of its sales in 2018, followed closely by cookware goods including Reynolds foil, which was first sold in 1947 and has 64 per cent of the US market share. Hefty tableware, including disposable cups and cutlery, made up the remaining 24 per cent of revenue.

Efficiency, Innovation

Reynolds said it plans to grow through improved operational efficiency and through innovation, aiming to generate 20 per cent of its revenue each year from products introduced within the previous three years. The company is also focusing on goods made with recycled, renewable, recyclable and compostable materials, according to its filings.

Reynolds will be controlled by PFL, a subsidiary of a company wholly owned by Hart, according to the company's filings. PFL will have 77 per cent of the voting rights of Reynolds, which plans to use some of the IPO proceeds to repay debt and for general corporate purposes.

The offering was led by Credit Suisse Group AG, Goldman Sachs Group Inc and JPMorgan Chase & Co. The shares are trading on the Nasdaq Global Select Market under the symbol REYN.

BLOOMBERG