NEW YORK — Toys R Us said Friday that it plans to go public again by raising as much as $800 million in an initial public offering, a bid to take advantage of its business turnaround even in a rocky IPO market.
The offering would be one of the biggest retail IPOs in years. But experts say IPOs so far this year have been disappointing, so pricing will be key.
Despite the recession dampening sales over the past year, Toys R Us has steadily improved net income under CEO Jerry Storch, the former Target Corp. vice chairman who joined the company in 2006. The year before, the company had been taken private in a $6.6 billion buyout by investors led by Bain Capital, Kohlberg Kravis Roberts and Vornado Realty Trust.
Under Storch, the company has improved its merchandise selection and customer service and become more competitive on price, toy analyst Jim Silver said.
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BMO Capital Markets analyst Gerrick Johnson said the timing for the IPO makes sense because the toy industry is doing well, Toys R Us has been taking market share from key competitors Target and Wal-Mart Stores.
But Paul Bard, director of research at Renaissance Capital, said pricing the offering will be important. Of the 12 IPOs so far this year, shares have fallen an average of 5 percent.
Public equity firms have a vested interest in shares gaining after IPOs because they usually remain majority shareholders, he said.
The retailer said in a filing with the Securities and Exchange Commission that it will use the proceeds from the offering to pay off some of its debt and for general corporate purposes. It has about $5.2 billion in debt.
It did not say how many shares it will sell. Bard said typically in private-equity backed IPOs, firms offer a 10 to 20 percent stake.
The stock would trade on the New York Stock Exchange under the ticker symbol TOYS.
The company, based in Wayne, N.J., first went public in 1978. For years, Toys R Us, which operates or licenses more than 1,500 stores, was the leading toy retailer in the world, but as discounters began encroaching on its territory, its sales began to suffer.
When it was taken private in 2005, it was becoming increasingly pressured by competition from Wal-Mart Stores, Target and the Internet.
But since CEO Jerry Storch came aboard in 2006, the company has turned around results. It has consolidated some Toys R Us and Babies R Us stores and expanded its Web presence, acquiring the addresses eToys.com, babyuniverse.com, FAO.com and toys.com in 2009.
In the year ended Jan. 30, Toys R Us said its net income rose to $312 million from $218 million. That is despite the fact that revenue fell to $13.57 billion from $13.72 billion, a year earlier, as the recession hurt sales for most retailers. From 2006 to 2008 the company logged steady revenue gains.