IPO Report: Party City Holdco (PRTY)

Francis Gaskins  |

Party City Holdco (PRTY) is the leading party goods retailer by revenue in North America and, it believes, the largest vertically integrated supplier of decorated party goods globally by revenue with multiple levers to drive future growth across channels, products and geographies. The company is based in Elmsford, NY.

Six other companies are scheduled for the week of April 13. The full IPO calendar is available at IPO Premium.

Manager, Joint-managers: Goldman Sachs, B of A Merrill Lynch, Credit Suisse, Morgan Stanley
Co-managers: Barclays, Deutsche Bank Securities, J.P. Morgan, William Blair, Stephens, Telsey Advisory Group

PRTY scheduled a $350 million IPO on NYSE with a market capitalization of $1.86 billion at a price range midpoint of $16 for Thursday, April 16, 2015 on NYSE. 

SEC filings

Party City Holdco Overview

PRTY is the leading party goods retailer by revenue in North America and, it believes, the largest vertically integrated supplier of decorated party goods globally by revenue with multiple levers to drive future growth across channels, products and geographies.

Party City Holdco Valuation


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Party City Holdco (PRTY)








*adj net income


Party City Holdco Conclusion

Neutral plus

PRTY is a specialty retailer/wholesaler that produces 7,000 new products every year.  Seems to be protected from Amazon-eBay type online competition by the flow of new products that need to be seen to be appreciated, in person.

11% top line revenue growth, to $2.3bb, 53% wholesale

39% gross profit

3.8% adj net income % of rev

.8% price-to-sales

21 P/E, price-to-tangible book of -1.3

Per share dilution of -$28.25 vs IPO mid-point  of $16

Party City Holdco Business

PRTY is the leading party goods retailer by revenue in North America and, it believes, the largest vertically integrated supplier of decorated party goods globally by revenue with multiple levers to drive future growth across channels, products and geographies.

With approximately 900 locations, PRTY has the only coast-to-coast network of party superstores in the U.S. and Canada that make it easy and fun to enhance special occasions with a differentiated shopping experience and an unrivaled assortment of innovative and exciting merchandise offered at a compelling value.

Through a series of acquisitions between 2005 and 2010, PRTY built a powerful retail operation that captures the full manufacturing-to-retail margin on a significant portion of the products sold in its stores.

Based on its revenues, PRTY believes it is the largest global designer, manufacturer and distributor of decorated party supplies with products found in over 40,000 retail outlets worldwide, including PRTY’s own stores as well as independent party supply stores, mass merchants, grocery retailers, dollar stores and others.

Party City Holdco New Products

PRTY has a history of driving innovation in the category with an in-house product development team that introduces approximately 7,000 new products annually.

Party City Holdco Competitive Advantages

PRTY’s category-defining retail concept, multi-channel reach, widely recognized brands, broad and deep product offering and low-cost global sourcing model are, PRTY believes, significant competitive advantages. PRTY believes these characteristics position it for continued organic and acquisition-led growth and margin expansion.

Party City Holdco Growth Plan

PRTY spent the last seven years integrating retail acquisitions and rationalizing the store base.

PRTY believes there are more than 350 locations in North America that present opportunities to expand the party superstore base.

In 2014, PRTY opened 23 Party City stores, acquired six stores and closed ten Party City store locations.

A new Party City location costs an average of $765,000, which includes $90,000 in pre-opening expenses and $325,000 of net startup inventory.

A typical new store reaches approximately 80% maturity in the first year of operation and reaches maturity in its fourth year of operation.

PRTY targets locations where stores have the potential to generate annual sales of at least $2 million at maturity and achieve a consolidated pre-tax store contribution of approximately 18% to 20%.

PRTY expects new stores to have a payback period of approximately three years and to generate an average pre-tax cash-on-cash return on invested capital of approximately 50% in year three (including margin generated from PRTY's vertical model).

Party City Holdco Global Network

PRTY’s global network of owned and third-party manufacturers, combined with its state-of-the-art distribution systems, position PRTY to deliver high-quality, cost-competitive products with turnaround times and fill rates that PRTY believes are among the best in the industry.

PRTY has long-term relationships with many of its wholesale customers, for whom PRTY provides sales support through in-store signage and planogram support.

PRTY’s products are available in over 100 countries with the U.K., France, Germany and Australia among the largest end markets for PRTY outside North America.

PRTY believes that through its extensive offerings, as well as its industry-leading innovation, customer service levels and compelling value proposition, PRTY will continue to win with its customers.

Party City Holdco History

Founded in 1947, PRTY started as an importer and wholesaler and grew to become one of the largest global designers, manufacturers, distributors and retailers of decorated party supplies by revenue. PRTY’s broad selection of decorated party supplies includes paper and plastic tableware, metallic and latex balloons, novelties, costumes and other garments, stationery and gifts for everyday, themed and seasonal events.

PRTY was the subject of a private equity buyout July 27, 2012.

Party City Holdco Intellectual Property

PRTY owns the copyrights in the designs it creates and use on its products and various trademarks and service marks used on or in connection with its products.

It is PRTY’s practice to register its copyrights with the United States Copyright Office and its trademarks and service marks with the United States Patent and Trademark Office, or with other foreign jurisdictions, to the extent PRTY deem necessary.

In addition, PRTY relies on unregistered common law trademark rights and unregistered copyrights under applicable U.S. law to distinguish and/or protect its products, services and branding.

PRTY does not believe that the loss of copyrights or trademarks with respect to any particular product or products would have a material adverse effect on its business.

Party City Holdco Competition

In its retail segment, PRTY stores compete primarily on the basis of product mix and variety, store location and layout, customer convenience and value.

Although PRTY competes with a variety of smaller and larger retailers, including, but not limited to, independent party goods supply stores, specialty stores, dollar stores, warehouse/merchandise clubs, drug stores, mass merchants and catalogue and e-commerce merchandisers, PRTY believes that, based on their revenues, its retail stores maintain a leading position in the party goods business by offering a wider breadth of merchandise than most competitors and a greater selection within merchandise classes, at a compelling value.

PRTY is one of only a few vertically integrated suppliers of decorated party goods.

While some of PRTY’s competitors in its markets may have greater financial resources, PRTY believes that its significant buying power, which results from the size of its retail store network and the breadth of its assortment, is an important competitive advantage.

Many of PRTY’s retail competitors are also customers of its wholesale business.

In its wholesale segment, PRTY competes primarily on the basis of diversity and quality of its product designs, breadth of product line, product availability, price, reputation and customer service.

Although PRTY has many competitors with respect to one or more of its products, PRTY believes that there are no competitors who design, manufacture, source and distribute products with the complexity of design and breadth of product lines that PRTY does.

Furthermore, PRTY’s design and manufacturing processes create efficiencies in manufacturing that few of its competitors can achieve in the production of numerous coordinated products in multiple design types.

Competitors include smaller independent manufacturers and distributors, as well as divisions or subsidiaries of large companies.

Certain of these competitors control various party goods product licenses for widely recognized images, such as cartoon or motion picture characters, which could provide them with a competitive advantage. However, PRTY controls a strong portfolio of character licenses for use in the design and production of its metallic balloons and, as a result of the acquisition of Designware, PRTY has access to a strong portfolio of character and other licenses for party goods.

Party City Holdco 5% Shareholders Pre-IPO

Funds managed by Advent International Corporation       23.8%

Funds affiliated with Thomas H. Lee Partners, L.P.          69.3%

Todd M. Abbrecht         69.3%

Jefferson M. Case         23.8%

Steven J. Collins           23.8%

Uttam K. Jain                   69.3%

Joshua M. Nelson            69.3%                       

Party City Holdco Dividends

No dividends are planned.

Party City HoldcoUse of Proceeds

PRTY expects to receive $326 million from its IPO and use it for the following:

to pay a $30.7 million termination fee, in the aggregate, to the Sponsors pursuant to PRTY’s management agreement with them, which will thereafter be terminated, and to redeem all or a portion of the senior PIK toggle notes, which mature on August 15, 2019.

The amount of senior PIK toggle notes PRTY redeems will depend on the amount of net proceeds from this offering remaining after payment of the management agreement termination fee. Assuming an initial offering price of $16.00 per share, which is the midpoint of the range listed on the cover page of this prospectus, PRTY expects to redeem approximately $281 million of the senior PIK toggle notes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
PRTY Party City Holdco Inc. 11.85 0.20 1.72 708,677 Trade



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