AGA Medical Debuts During Cautious IPO Market (AGAM)

It was just over the weekend that we noted how cautious the initial public offering market has become.  What a difference a couple months can make.  Today marks the debut of AGA Medical Holdings, Inc. (NASDAQ: AGAM).  The medical devices maker for the treatment of structural heart defects and vascular diseases priced its IPO of 13.75 million shares of common stock at $14.50 per share.  This is a poor pricing, but as of 11:00 AM EST this IPO is still trading just above its pricing.

The problem with this offering is that this was priced below the revised $15 to $16 per share range, which had already been reduced from a previous range of $19 to $21 per share.  BofA Merrill Lynch, Citi, Deutsche Bank Securities, Leerink Swann and Wells Fargo were listed as the joint book-running managers for the IPO. These underwriters have a 30-day option to purchase up to an additional 2,062,500 shares of common stock to cover over-allotments.

For the year ended December 31, 2008 and the six months ended June 30, 2009, respectively, AGA Medical generated revenues of $166.9 million and $94.4 million; and it generated EBITDA of $46.5 million and $17.8 million and net income of $9.1 million in 2008 and a loss of -$4.2 million during the first six-months this year.

AGA Medical is a private equity-backed investment, with Welsh Carson, Anderson, & Stowe and affiliates of the firm.   The backers are selling shares, but will still hold a majority if the over-allotment is not taken and will hold about 49.6% of AGA Medical if the over-allotment is taken.

At 11:00 AM EST we have seen some 2.6 million shares trade hands and the stock is up at $14.52 after having seen a post-open trading range of $14.32 to $14.85.

JON C. OGG
OCTOBER 21, 2009