Aramark plans to raise up to $1bn in IPO

Aramark, the food and concession provider for facilities from stadiums to prisons, will begin investor meetings for an initial public offering as early as next week as it looks to raise up to $1bn from a listing, according to people familiar with its plans.

An IPO of Aramark, which was acquired in a 2007 buyout worth $8.3bn, would pave the way for its private equity backers, led by Warburg Pincus, Thomas H. Lee and Goldman Sachs Capital Partners, to exit their investment.

The start of investor meetings next week is expected to coincide with the launch of the Hilton IPO roadshow. The global hotel chain is backed by Blackstone and is looking to raise as much as $2.25bn from a listing.

The two IPOs are likely to be among the largest deals in the last month of what has been a banner year for new listings in the US. A buoyant stock market has allowed private equity groups to tap into equity market investors to exit some of their boldest acquisitions made before the financial crisis of 2008.

Aramark and Hilton would be the latest to test investors’ willingness to snap up shares in highly levered businesses.

Aramark has net debt of $5.7bn and a total debt to operating cash flow ratio of 4.75. Hilton has net debt of $13bn and a total debt to operating cash flow ratio of 5.

Proceeds from both deals are intended to help pay down debt before allowing their investors to start selling shares in subsequent offerings.

The company employs about 272,000 people and operates in 22 countries, where it provides food services and catering at stadiums, hospitals, schools and universities. It generated $13.9bn in sales for its fiscal year ended September 27, up from $13.5bn in the previous year. However, net income fell from $104m to $69m.

Aramark filed for a listing in September using a place holder value of $100m to calculate fees. A person familiar with its plans said the company would seek as much as $1bn from an IPO.

The IPO represents a significant moment in the career of Eric Foss, Aramark’s chief executive, who for many years was a leading executive working with Indra Nooyi, the PepsiCo chief executive. Mr Foss was brought in last year with the aim of returning Aramark to public ownership.

Aramark’s 2007 take-private was led by Joseph Neubauer, then the company’s chief executive, who holds a stake of about 10 per cent. JPMorgan Partners and CCMP Capital Investors also each own about 10 per cent and participated in the acquisition, which included about $2bn of Aramark’s debt.

Goldman Sachs, JPMorgan Chase, Credit Suisse and Morgan Stanley are underwriting the offering. The company plans to list on the New York Stock Exchange.

Additional reporting by Anjli Raval and Alan Rappeport

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