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Lineage, a cold storage business founded by a pair of former Morgan Stanley bankers, has raised $4.4bn in the largest US initial public offering since last September, a sign of revival for the new listings market.
The real estate investment trust priced its offering in the top half of its target range, and shares rose a further 4.6 per cent when they started trading on Thursday. The IPO gave Lineage an initial market capitalisation of about $18bn.
The solid reception, added to a successful $490mn listing by software group OneStream earlier this week, is a positive sign for the health of the US listings market, which is slowly recovering after its worst slowdown in decades.
Companies have now raised $23.7bn in non-Spac US IPOs this year, according to Dealogic, a 133 per cent increase over the same period in 2023. Lineage operates an international chain of cold storage facilities for commercial clients such as food retailers and distributors, as well as manufacturers of pharmaceuticals and pet food.
Greg Lehmkuhl, Lineage chief executive, said strong investor demand had encouraged the company to increase the size of its offering.
“Unlike some IPOs, we were already a fairly large company and well-proven after 16 years of growth . . . we’ve been super excited about how much [investors] were interested going back over the past year,” he said.
Former bankers Adam Forste and Kevin Marchetti started Lineage with the purchase of a warehouse in Seattle in 2008, and have grown the business through more than 100 acquisitions.
Lehmkuhl said going public would make it easier for the company to fund further deals.
“The top 10 [companies] constitute less than 25 per cent of the global market share of cold storage so we have a whole lot of headroom to continue to grow through acquisition,” he said.
Forste and Marchetti now serve as co-executive chairmen.
Lehmkuhl said Forste and Marchetti do not manage day-to-day activities but are still “actively involved” in major capital allocation and strategy decisions. “It is an awesome American dream founders story,” he said.
Many Reits have struggled in the stock market since interest rates began to rise in 2022, with investors concerned about debt servicing costs and falling demand. The broadest US Reit index has lagged well behind the broader market this year, adding just 1.7 per cent year to date, and is down more than 20 per cent since the start of 2022.
However, Lehmkuhl said Lineage’s niche benefited from “a lot of barriers to entry” and was not as cyclical as less specialist areas of the warehouse industry.
“People are always going to eat. Even in a higher-inflation environment we’ve been able to perform really well,” he said.
Lineage reported revenue of $5.3bn in 2023, up 8 per cent from $4.9bn the previous year. It reported a net loss of $96mn. The company plans to use the bulk of the proceeds from the IPO to pay down its net debt, which stood at about $10.9bn at the end of 2023.