Thomas H. Lee Partners LP agreed to buy a majority stake in Party City Corp. from its private equity owners in a transaction the firm valued at $2.69 billion including debt, less than two months after the largest US party supplies retailer filed for an initial public offering.
The current owners, Advent International Corp., Berkshire Partners LLC, Weston Presidio, and management, will hold “significant” minority stakes, Boston-based Thomas H. Lee said Tuesday in a statement. Party City in April filed to raise up to $350 million in an IPO that hasn’t been completed.
Private equity managers are turning to other buyout firms to buy and sell companies as the IPO market slumps amid Europe’s debt crisis. So-called secondary sales are the second most common way to exit investments after sales to strategic buyers, accounting for about 25 percent of divestitures in the first quarter, according to Preqin Ltd., a London-based researcher.
“The IPO window has shut very abruptly and is weak for the time being, so secondary buyout sales are looking strong,” said David Fann, chief executive officer of TorreyCove Capital Partners LLC, a La Jolla, Calif., firm that advises private equity managers and investors.
Valuations have also given investors pause after Facebook Inc. fell 30 percent from its IPO price. At least 13 offerings have been withdrawn or postponed globally since Facebook’s May 17 offering, slowing a market for deals that’s struggled to keep momentum as US stock values have failed to recover to levels before the financial crisis.
Party City was founded in 1947 as a wholesale party supplier. The retailer had $982.3 million of debt as of Dec 31, according to regulatory filings.