Doing it Big: KKR-backed Gardner Denver Prices Offering at $1.01 billion

Gardner Denver Holdings Inc. (NYSE: GDI) is an engineering firm that has been at the helm of numerous creations across industries for over a century. The company not only sells to many states in mainland USA but also has a market in over 175 nations. Some industries that Gardner Denver serves include the oil and gas, adit and land mining, pharmaceutical, automotive and aerospace industries.

Based in Milwaukee, Wisconsin, Gardner Denver has little competition from peer companies due to its diverse market. The firm deals in products such as industrial grade compressors, green energy solar panels, machine parts used in power generation as well as home-use commercial goods like vacuum cleaners and electronic-cleaning blowers. In addition to selling goods, Gardner Denver offers its consumers support services to go along with the sales. Because of these services, the firm has a loyal consumer base who appreciate the reliability, efficiency and lowered energy expenditures that come with being a Gardner Denver customer.

For its entry into the market, Gardner Denver will offer 41.3 million Class A shares to public investors, with a 6.195 million share buy-in option for insiders who want to take part in the offering. These insiders will be Goldman Sachs, Credit Suisse, Morgan Stanley, Deutsche Bank, Citigroup, Simmons & Co., Baird, William Blair, UBS Investment Bank, Credit Agricole CIB, Macquarie Capital, Stifel, Mizuho Securities, HSBC Corp. and Gardner Denver’s own parent company KKR Inc. The Class A shares on offer will sell within the $23 to $26 price range, with the company getting an approximated $1.01 billion in proceeds value from the issuance at midpoint. If the underwriters exercise their 30-day overallotment option, Gardner Denver’s fully diluted market value will be $4.65 billion post-IPO.

Gardner Denver is both an appealing and risky venture to buy into as an investor. The company’s financials have for one been getting on the right track if the past two years are anything to go by. Between 2015 and 2016, Gardner Denver made a loss in both revenue and profits. It dropped from $2.13 billion to $1.94 billion on the income front, and from $779.1 million to $716.7 million in operational profit. Nevertheless, the revenue and profits made in 2016 were still substantial and were mitigated by the drastic reduction in the company’s loss. Gardner Denver had made losses of up to $352 million in the twelve months ending December 31st, 2015. Over the same period in 2016, the company cut is losses down to $31.3 million. The reduction in loss is a positive sign for investors, especially because it raised the firm’s P/S ratio to 2.4x, well above its peers.

The downside that comes with allotting shares in the Gardner Denver IPO is that an investor would take on the risk that comes with international operations of the company. Most of the firm’s market is overseas meaning that the company is at the mercy of regulatory measures outside the US. This unfortunate fact increases the burden of risk for the investor who cannot be certain of the market at any given time, thereby cannot be assured of a reliable returns regime.

Gardner Denver plans to use fund from the issuance to pay off its debt and expand its operations.