Burlington Stores returns to market, shares jump 50 percent

Burlington Stores shares rose nearly 50 percent after Bain Capital returned the discount apparel retailer to the stock market, tapping into the appeal of cheaper clothing in a tough economy.

The retailer behind the Burlington Coat Factory brand, taken private seven years ago, is the fourth company that Bain Capital has floated on the stock market this year.

Burlington's shares opened at $23.50 and touched a high of $25.10 in intraday trading, valuing the company at $1.8 billion.

Booming stock markets have encouraged private equity firms such as Bain Capital, Blackstone Group LP and Apollo Global Management LLC to cash in on their investments by taking their companies public this year.

Discount retailers have also performed much better than higher-priced competitors, as a lackluster job market hits consumer spending and many American shoppers contend with higher payroll taxes and gasoline prices.

"It's the hottest sector in retail," said Burt Flickinger, managing director of Strategic Resource Group, a consumer industry consultant.

"Disposable income is down," he said. "(People) can really save on food, fuel and clothing and Burlington is one of the key places to save."

Burlington, which sells the BCF and Baby Depot brands, reported 10 percent growth in revenue for the six months ended August 2013. Abercrombie & Fitch and Aeropostale each reported a decline in revenue in the last quarter.

Burlington, helmed by former Kohl's Corp executive Thomas Kingsbury, raised about $226.6 million by pricing its IPO of 13.3 million shares at $17 each, slightly above its expected price range.

Bain Capital bought the company for $2.06 billion in cash in January 2006, paying $45.50 per share for a company founded in 1972 as a single store in the New Jersey town of the same name.

Burlington, which also sells MJM Designer Shoes, now operates more than 500 stores across the United States and Puerto Rico, although this is significantly fewer than discount rivals TJX Cos and Ross Stores.

Burlington will use some of the proceeds to redeem senior notes worth $171 million. The company had about $1.7 billion in long-term debt as of August 2013 and total cash and cash equivalents of $33.4 million.

"The company is highly leveraged. That's the fingerprint that all these private equity firms leave," IPOFinancial.com president David Menlow said.

Bain Capital will own 74 percent of Burlington after the offering if the underwriters exercise their full options, valuing its stake at about $1.3 billion.

The private equity firm has taken three other companies public this year: HD Supply Holdings, Quintiles Transnational Holdings Inc (Q.N) and Bright Horizons Family Solutions Inc.

JP Morgan, Morgan Stanley, Bank of America Merrill Lynch, Goldman Sachs and Wells Fargo Securities were the lead underwriters for the Burlington IPO.