EATON HOPING TO REAP $176 MILLION FROM IPO
NEW YORK — T. Eaton Co., the Toronto chain that emerged from bankruptcy last November, is aiming to raise some $176 million before underwriting costs in an initial public offering that is expected to close next Wednesday.
Eaton’s, a family-run department store company founded in 1869, will offer 11.7 million shares at about $10.40 each in the IPO.
As part of the deal, 1.9 million shares will be issued to Eaton family members in exchange for $19.9 million of subordinated notes.
After the deal, the Eaton family will retain control of the 64-unit chain.
And in accordance with the company’s reorganization plan, the Eaton family is sinking at least $50 million in cash into the business through Eaton’s of Canada Ltd., a holding company controlled by the family.
Proceeds from the IPO will be used to refurbish Eaton’s stores and refocus the company’s efforts on selling apparel, accessories and cosmetics.
The Eaton shares will be listed on the Toronto Stock Exchange and the Montreal Exchange under the ticker symbol “ETN.”
While restructuring last year, Eaton’s said it would make a public stock offering if its attempts to find a buyer failed. In April, the company announced it would go ahead with an IPO.
Despite Canada’s strong bull market, securities analysts have a guarded outlook about the Eaton’s deal because a distressed company rarely seeks to tap public markets for capital.
Although rumors circulated that several U.S. retailers — including Sears, Roebuck & Co., J.C. Penney Co., Federated Department Stores Co. and May Department Stores Co. — were eyeing the Eaton’s business, a deal did not materialize.
In reorganizing, Eaton’s has closed 21 department stores and ceased selling furniture, appliances and electronics in 20 of its remaining 64 stores in Canada.
It emerged from bankruptcy with a three-year, $177 million credit facility from G.E. Capital, Royal Bank of Canada and Congress Financial Corp. (Canada).
For the nine months ended Nov. 1, Eaton’s lost $71 million, after restructuring charges of $96 million, on sales of $758 million.
When it filed for bankruptcy protection in February 1997, Eaton’s said it had lost $88 million in 1996 on volume of $1.2 billion.
At its peak, Eaton’s operated 104 stores.