The IPO Buzz: BrightSpring Health (BTSG) Prices IPO at $13.00 – $2.00 Below Range

KKR-backed BrightSpring Health Services (BTSG) priced its IPO at $13.00 – $2.00 below the bottom of its range – on Thursday night (Jan. 25, 2024). BrightSpring’s stock opened at $12.00 – down $1.00 from its IPO price – at 1:16 p.m. EST on the NASDAQ today – Friday, Jan. 26, 2024 – on volume of about 4.4 million shares. The stock slid further, trading at $11.79, down 9.31 percent, at about 1:40 p.m. EST. BrightSpring‘s stock closed Friday at $11.00 – down $2.00 or off 15.38 percent from its $13.00 IPO price. Volume for the day was about 24.08 million shares.

BrightSpring Health’s IPO raised $693.33 million by pricing the full 53.33 million shares in the prospectus at $13.00 – $2.00 below the low end of its $15.00-to-$18.00 range.

The $13.00 IPO price gave BrightSpring a market cap – or a valuation – of $2.23 billion.

Goldman Sachs, KKR, Jefferies, Morgan Stanley, UBS Investment Bank, Bank of America Securities, Guggenheim Securities and Leerink Partners were the joint book-runners of BrightSpring Health’s IPO.

The below-range pricing followed a bumpy roadshow week. The word was that IPO investors pushed back on price due to their concerns about the company’s valuation, its debt load and KKR’s role.

“We need the deal to work,” a seasoned IPO investor says.

The prospectus disclosed that KKR had “a conflict of interest” because one KKR affiliate served as a joint book-runner on the IPO and another KKR affiliate is a principal stockholder. (Note: This “conflict of interest” disclosure is not uncommon in private equity-backed companies’ documents when they go public.)

The Louisville, Kentucky-based company raised another $400 million on Thursday night (Jan. 25, 2024) by pricing 8.0 million Tangible Equity Units (BTSGU) with a 6.75 percent coupon – also known as mandatory convertible preferred securities – at $50.00 each in a concurrent offering. The units were also expected to start trading today on the NASDAQ.

BrightSpring Health Services, Inc. plans to use the proceeds from the IPO and the concurrent unit offering – about $1.1 billion combined ($1093.33 million) to repay most of an earmarked $1.3 billion in debt, according to the prospectus. After the debt payment, BrightSpring will still have about $2.3 billion in debt outstanding.

In March 2019, private equity firm KKR announced that it had completed the acquisition of BrightSpring for about $1.32 billion with a minority investment from an affiliate of pharmacy chain Walgreens Boots Alliance.

After the IPO, an investment vehicle affiliated with KKR and Walgreens Boots Alliance will own about 67.9 percent of the voting power of BrightSpring’s outstanding stock.

This was BrightSpring Health’s second attempt to go public. The company filed to go public in mid-October 2021. It withdrew those plans in late November 2022.

BrightSpring Health says it provides healthcare services, including pharmacy services, to more than 400,000 people a day in all 50 states. The company serves mostly elderly or disabled people in home healthcare programs, hospice care, senior care facilities, rehab centers and group homes.

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