October 15, 2010 / 2:16 PM / 9 years ago

Tower shares steady in debut after weak pricing

NEW YORK (Reuters) - Shares of auto parts supplier Tower International Inc TOWR.N closed flat at their IPO price in their stock market debut on Friday after pricing below the expected range as investors shied away from a highly competitive and commoditized industry.

The stock opened on the New York Stock Exchange at $13.55, 4.2 percent above its initial public offering price, but closed at $13. IPOs debuting in the United States so far this year have posted returns averaging 14.27 percent, according to Thomson Reuters data.

Even though Tower’s IPO priced at a 19 percent discount to the midpoint of its expected price range of $15 to $17, that it came to market at all shows renewed risk appetite among investors, said Francis Gaskins, President of IPOdesktop.com.

Tower’s IPO priced on Thursday.

The Livonia, Michigan-based supplier of stamped metal parts for automakers sold 6.25 million shares for $13 each, raising $81.25 million.

Tower’s IPO comes three years after private equity firm Cerberus Capital Management CBS.UL bought the company’s predecessor company out of bankruptcy. Cerberus also invested in auto lender GMAC and automaker Chrysler, both of which underwent restructurings with U.S. government bailouts.

Tower, formerly known as Tower Automotive LLC, said in a regulatory filing that it would use proceeds from the IPO to repay a revolving credit facility and debt.

The company posted a net loss attributable to common unitholders and stockholders of $11.2 million on revenue of $980.8 million in the six months ended June 30.

“In the metal stamping business you’ve got very few barriers to entry and you’ve got Chinese competitors coming in at a much lower cost. It’s a very tough business to be in and Tower doesn’t really have anything that separates it from the other metal stampers that are out there,” said Richard Hilgert, an equity analyst at Morningstar who specializes in auto parts suppliers.

Separately, shares of Body Central Corp BODY.O, which sells clothing and accessories for young women, also closed flat with their $13 IPO price in their stock market debut.

Body Central sold 5 million shares for $13 each in its IPO. It had planned to sell shares for $14 to $16 each.

Underwriters on the Tower offering were led by Goldman Sachs & Co (GS.N), Citigroup (C.N) and JPMorgan (JPM.N). Underwriters on the Body Central offering were led by Piper Jaffray and Jefferies & Co.

Tower shares are trading under the symbol “TOWR.” Body Central shares are trading on the Nasdaq under the symbol “BODY.”

Reporting by Clare Baldwin; Editing by Lisa Von Ahn and John Wallace

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