Realogy hopes going public will reduce $3B worth of debt
But as the firm registers for IPO, Toys R Us has been in limbo since 2010
At least one firm in this year's NJBIZ listing of the top 100 privately held companies may not be on the list for long, while another appears to be stuck in a holding pattern more than two years after announcing plans to go public.
Realogy Corp., the Parsippany-based residential brokerage giant, could return to the public market after its parent company announced in early June that it had registered for an initial public offering. The company, Domus Holdings Corp., said it hopes to raise $1 billion through the sale, which will help it pay down a significant piece of its debt.
New Jersey's business community heard a similar message in May 2010, when Toys R Us filed for its own IPO. But the Wayne-based toy retailer has not moved forward with the offering, stalled by reported management strife and struggling sales.
Realogy, which owns brokerage brands like Century 21, Coldwell Banker and ERA, has about 1,300 employees in New Jersey. Company executives declined to discuss the IPO, citing federal regulations that preclude them from doing so, but CEO Richard A. Smith recently said the housing market was showing signs of life after more than six years of decline.
In a filing with the Securities and Exchange Commission, Domus Holdings Corp. said in the first five months of 2012, the volume of completed home sales rose 12 percent from the same period in 2011. The firm said it was "well positioned to benefit from a sustained recovery" in the housing market because of its size, market leadership and "substantial brand equity" across its different residential brokerages.
"We believe that we are experiencing the beginning of a recovery in the residential real estate market," the company wrote in the June filing. The firm, which is building a new headquarters in Madison, also has global business units for employee relocation and title and settlement services.
Domus hopes to use the IPO to reduce its debt by about $3 billion, according to a company press release and its June registration filing with the SEC. That includes raising $1 billion and having creditors convert about $2 billion in existing bonds into stock.
News of the Domus IPO came two years after Toys R Us announced its own offering. In an SEC filing that was last updated in June 2011, the retailer said it hoped to raise $800 million through an IPO and use the proceeds to repay debt and "for general corporate purposes."
Company officials did not respond to calls for this story, and doubts have been raised about whether the 64-year-old retailer will still be able to go public. The company has been stymied by management defections, a decline in same-store sales and competition from Wal-Mart and Amazon.com, according to an April 6 story in The New York Times.
Toys R Us, which has some 1,500 stores worldwide, was publicly traded from 1978 to 2005, at which point it was acquired by a private equity group. Since then, the retailer has tried to strengthen its management team, starting with the 2006 hiring of CEO Gerald L. Storch, the company wrote in SEC filings. The company also sought to integrate its Toys R Us and Babies R Us stores, while growing its online retail segment.
But Toys R Us hasn't updated its SEC registration statement in more than a year, which could be a telltale sign.
"It suggests that they're not moving forward, or they would be keeping their registration statement updated," said Kathleen Smith, a principal at Renaissance Capital, a Greenwich, Conn.-based firm that tracks IPOs. "They haven't officially withdrawn, but I would look at that as an IPO that's on the backburner."
Toys R Us is not alone: Smith said there is a backlog of 160 companies nationwide that have registered for an IPO, but have yet to pull the trigger.
"We're in a time when investors have not been making money on IPOs," she said. "And therefore, any company that comes out has to offer their IPOs at a big discount, maybe a disappointing discount for what they were expecting."
Smith's firm has tracked several New Jersey firms that have declared their intentions to go public, including some that filed more than a year ago. Avaya, a Bernards-based business communications firm, and New Century Transportation, a Westampton-based trucking company, registered in June 2011 and August 2010, respectively.
Correction: The print version of this story contained an incorrect figure in the headline. It has been fixed above.