Birkenstock Holding, the German shoe maker, will soon take its first steps as a public company.
Typically, macro issues like war can spell doom for the IPO market, but Birkenstock is going forward with its initial public offering. On Tuesday, the shoe company raised about $1.5 billion after selling 32.3 million shares at $46 each, the midpoint of its $44 to $49 price range. Birkenstock will open Wednesday on the New York Stock Exchange, under the ticker BIRK. More than 20 investment banks are listed as working on the Birkenstock IPO. Goldman Sachs, along with J.P. Morgan and Morgan Stanley, are lead bookrunners on the deal.
“The outlook is definitely cloudier than it was a few weeks ago,” noted Matt Kennedy, senior IPO strategist at Renaissance Capital, a provider of pre-IPO research, “but I don’t think the [Gaza-Israel] war will totally derail U.S. IPOs.” In September, a trio of well-known companies—Arm Holdings, Instacart and Klaviyo— went public. Instacart is trading below its offer price, while Arm has lost much of its first day gains. Only Klaviyo has risen since its market debut in September.
The company with the most to gain from a successful Birkenstock IPO? Private equity firm L Catterton. Founded in 1989, L Catterton is led by global co-CEOs J. Michael Chu and Scott Dahnke. The PE firm has made more than 250 investments in consumer brands, including pet food company Canidae, luxury fitness chain Equinox, as well as online beauty products retailer Oddity Tech and Honest Company. The last two have both gone public but are now trading at a big discount.
L Catterton and Financiere Agache acquired Birkenstock in 2021 in a deal Reuters said was valued at about 4 billion euros ($4.35 billion). The transaction included a roughly 3.3 billion euros ($3.49 billion) equity investment, according to an Oct. 4 regulatory filing. Most, or nearly all, of the $3.49 billion equity investment apparently came from L Catterton, which owned 100% of Birkenstock ordinary shares before the IPO.
“Birkenstock is fundamentally a very strong brand that has Ebitda margins of 30%-plus as well as double digit growth,” Kennedy said. Revenue for the shoe retailer has jumped nearly 71% in two years, and the company is also profitable. But Birkenstock is highly leveraged. Debt stood at 1.4 billion euros ($1.5 billion) as of June 30. Birkenstock plans to use proceeds from the IPO to pay off debt. Kennedy does note that of the four major consumer IPOs from this year, which include Oddity, Savers Value Village, Kenvue and Cava Group, all but Cava are trading below their offer prices.
L Catterton is likely to make out well from the Birkenstock IPO, according to Fortune’s calculations. Of the 32.3 million shares sold, about 10.8 million shares are coming from the company, while another 21.5 million are from L Catterton. At $46, L Catterton will make $989 million from the sale of shares. The firm’s remaining stake of 155.6 million shares is valued at about $7.2 billion (at $46 each). This comes to $8.2 billion, most of which are paper gains.
Assuming that all of the $3.49 billion equity commitment came from Catterton, then the PE firm is making about 2.33 times its money right now ($989 million plus $7.2 billion divided by $3.49 billion). Of course, this return could drop if Birkenstock shares don’t trade well. Or it could rise if the stock pops.
After the IPO, L Catterton will see its stake fall to about 80.8%, while Financière Agache, which is controlled by Arnault family group, will have 2%, according to the S-1.
Over the weekend…California Governor Gavin Newsom signed a new law in California that, starting in 2025, will require VC firms to annually survey the companies they backed in the last calendar year, reporting on company founding members’ gender identity, race, ethnicity, disability, and veteran status to the state Civil Rights Department. Portfolio companies will be allowed to opt out of the survey if they choose. “This bill resonates deeply with my commitment to advance equity and provide for greater economic empowerment of historically underrepresented communities,” Newsom said in a statement. —Jessica Mathews
See you tomorrow,
Luisa Beltran
Twitter: @LuisaRBeltran
Email: luisa.beltran@fortune.com
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