UPDATE 1-HD Supply IPO prices below range amid market volatility

Wed Jun 26, 2013 6:30pm EDT

By Olivia Oran

June 26 (Reuters) - Industrial and construction supplies company HD Supply Holdings raised $957.2 million in an initial public offering on Wednesday, less than expected, after recent stock market volatility and rising interest rates led some investors to take a cautious approach.

The Atlanta, Georgia-based company, backed by Bain Capital, Carlyle Group and Clayton, Dubilier & Rice, priced 53.2 million shares at $18.

HD Supply had originally hoped to price shares at a range of $22 to $25, although underwriters told investors earlier in the day it was offering shares at a range of $18 to $20, according to a person familiar with the matter.

Volatility in the equity markets within the last few weeks, triggered by concerns the Federal Reserve may trim back its stimulus policies, has led several companies to cut or scrap their IPOs.

Technology products retailer CDW Corp priced shares at $17 on Wednesday after reducing its target price range to $18 to $17 per share from $23 to $20.

Last week, Brazilian cement company Votorantim Cimentos postponed its $3.7 billion U.S. IPO due to market conditions.

HD Supply, one of the largest distributors of construction, industrial and maintenance supplies in North America, was trying to capitalize on a rebound in U.S. housing sector stocks which had been strong up until the last several weeks.

The housing market recovery encouraged other companies to hold IPOs earlier this year, including home builders TRI Pointe Homes Inc and home builder Taylor Morrison Home Corp , as well as plywood maker Boise Cascade Co.

The pickup in housing has been driven largely by record low mortgage rates. Worries that rates could rise have caused concern that the recovery could falter. Shares of homebuilders like PulteGroup Inc and Lennar Corp have each fallen over 15 percent in the last month.

HD Supply's high debt load, which stands at around 7.7 times earnings before interest, tax, depreciation and amortization (EBITDA) may have also caused pushback from some investors. The company will use its proceeds to reduce debt.

Bain, Carlyle and CD&R bought HD Supply out of Home Depot Inc for $8.5 billion in 2007.

HD Supply reported $8 billion in revenues for the fiscal year ended February 2013, up 14 percent from the same period a year prior. Adjusted EBITDA rose to $683 million, up 34 percent from the year prior.

HD Supply is expected to trade on the Nasdaq on Thursday under the symbol HDS. Bank of America, Barclays, JPMorgan and Credit Suisse led the IPO.

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