Verso Paper Corp. Slashes IPO Expectations (VRS, IP)

Verso Paper Corp. has just slashed its IPO terms in an amended IPO filing this morning.  The company’s prior range was up to 18.75 million shares and an expoected price range of $16.00 to $18.00.  That is now history. The company said in its filing that it now expects to sell 14 million shares at an estimated $12.00 price per share.  The company will still keep the proposed "VRS" ticker on the NYSE.

Credit Suisse and Citi are the lead underwriters, with co-managers listed as Deutsche Bank, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, and  Utendahl Capital Partners.

Verso is a North American supplier of coated papers to catalog and magazine publishers.  As the company says, the coated paper is used primarily in media, catalogs, magazines, commercial printing, high-end advertising brochures, annual reports, and direct mail advertising.  This was also essentially a cave-out from International Paper Co. (NYSE: IP).

After this offering, there will be 52,046,647 shares fully outstanding, or 54,146,647 if the over-allotment is exercised.  This may or ma y not matter, but as of the end of 2007 the company based the results on a share count of 38,046,647 common shares outstanding. Without the over-allotment, the company’s implied market cap at the $12.00 IPO pricing would be an approximate $624.5 million.  On a combined basis, the company would have posted $1.628.8 Billion in 2007 revenues and a net loss including restructuring and other issues of -$111.5 million.

Hmm… rising postage, magazine subscription trends, lower marketing, higher transport and commodity costs, and a softening economy… no wonder the terms were lowered.  Despite the company being the lowest cost producer, there are some outside macro-trends and secular-trends that may be outside of the company’s control.  The company has also rolled its subsidiaries into one company.

Apollo Management L.P. is no longer going to sell 2.8 million shares at the IPO.  Interestingly enough, part of the capital raised will go to repay debt, which looks like was used to finance a dividend to Apollo.

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Jon C. Ogg
May 14, 2008