Restoration raises $123.9 million, pricing IPO at top of range
Restoration Hardware Holdings Inc., the seller of leather couches and tables made of salvaged wood, raised $123.9 million, pricing its initial public offering at the top of the proposed range.
The Corte Madera, California-based company and shareholders sold 5.2 million shares for $24 each, according to a statement yesterday, after offering them for $22 to $24 apiece. The offering price values Restoration Hardware at $887.3 million, or 27 times net income in the 12 months through July. That makes the stock about 64 percent more expensive than peers, data compiled by Bloomberg show.
Restoration priced its stock more expensively than home retailers Williams-Sonoma Inc., Ethan Allen Interiors Inc. and Bed Bath & Beyond Inc., betting that investors would be willing to pay a premium after profit surged and U.S. housing starts climbed to the highest level in four years. Consumer confidence also rose to a five-year high in October, suggesting that the real-estate revival is bolstering household finances and will help sustain gains in spending.
Restoration Hardware didn't name competitors in its filings. It operates in a market "characterized by smaller, independent competitors" and targets consumers with household incomes of $200,000 or higher, according to regulatory filings.
Net income at Restoration Hardware jumped in the 12 months through July to $33.1 million as the company closed stores and sold more online and through catalogs, regulatory filings show. Sales increased 22 percent in the same period to $1.05 billion. Williams-Sonoma, Ethan Allen and Bed Bath & Beyond were valued at an average of 16 times net income in comparable periods in yesterday's trading.
While consumer sentiment improves, housing starts in the U.S. surged 15 percent in September to the highest level in four years, adding to signs of a revival in the industry at the heart of the financial crisis. U.S. jobless claims fell last week, with applications for benefits dropping by 9,000 to 363,000, the fewest in three weeks, according to the U.S. Labor Department.
Restoration Hardware moved ahead with the offering after former co-Chief Executive Officer Gary Friedman announced in August he would step down. The 55-year-old, who has frequently appeared in the large catalogs for which the company is known, will stay on as an adviser and board observer, the filing shows. As of Oct. 30, a letter from him is on the home page of the company's website, citing Don Quixote and ending with the words "Carpe Diem."
Friedman's departure came after the company investigated a personal relationship between the former co-CEO and an employee, according to filings. Friedman, who didn't plan to sell shares in the IPO, will own about a 16 percent stake after the offering, worth about $138 million at the IPO price, data compiled by Bloomberg show.
The shares offered represent a 14 percent stake in the company, filings show. The company sold 4.8 million of the shares in the sale, while management and other holders sold about 382,000 shares.
Restoration Hardware, previously listed on the Nasdaq Stock Market, was bought by a group including Friedman and private equity firm Catterton Partners in 2008. After the IPO, Catterton will have a 32 percent stake, filings show.
Restoration Hardware will be listed on the New York Stock Exchange under the symbol RH. Bank of America Corp. and Goldman Sachs Group Inc. led the sale.
--Editors: Elizabeth Wollman, John Lear
To contact the reporter on this story: Lee Spears in New York at lspears3bloomberg.net
To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3bloomberg.net
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