CDW IPO: 39% Premium Over Peer Group
CDW, which reported EBITDA of $737 million on revenue of $10.22 billion on 3/31/13, completed its IPO today and sold approximately 23.3 million shares at $17/share. The Company raised approximately $396 million. Underwriters have an overallotment option to sell up to an additional 3.5 million shares during the next 30 days.
This was at the low end of its projected IPO range of $17 to $18 -- revised down from the initial range of $20-$23. However, CDW outperformed its peer group according to The MW Scoreboard®, an industry analysis tool that tracks median multiples in the IT Solutions sector.
CDW was valued at 9.0x EV/EBITDA versus the 6.5x median for composite companies in the IT Supply Chain Services sector on the latest MW Scoreboard -- a 39% premium.
Why the Premium?
CDW out-executes its competitors with a leaner operating model delivering 7% EBITDA margins on sales, versus the 3% median reported by its peer group.
CDW has also met shareholder expectations. Compared to Insight and PC Connection, two close competitors, CDW is selling the same general products but with an operating income that is 2-3x greater.
Summary: CDW is unlike its traditional competitors and is valued more like specialty distributors such as Granger and Fastenal, which trade at 9x to 12x EV/EBITDA -- the higher end of the distributor valuation range.
Clearly with CDW's 9x EBITDA IPO, the public markets agree. BTW, at market close, CDW ended its first day up 8.06%, closing at $18.37.
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