What You Need to Know About Aerospace Parts Manufacturer Loar’s IPO

Loar Holdings, a manufacturer of parts for aerospace and defense companies, filed an S-1 Wednesday with the Securities and Exchange Commission (SEC), putting itself on the road to an initial public offering (IPO).

The company said it intends to offer 11 million shares, which could rise to 12.65 million if the IPO‘s underwriters exercise their option to purchase additional shares, at a price of $24 to $26 per share, raising up to $286 million.

After the IPO, Loar estimates that Abrams Capital will own about 44% of the company’s stock, with the IPO shares representing about 13% of the company’s 88 million total shares. At the midpoint of Loar’s range at $25 per share, the 88 million shares would give the company a total valuation of about $2.2 billion.

Loar said it intends to use the money it raises to pay off existing debts. The company’s stock will debut on the New York Stock Exchange (NYSE) under the ticker “LOAR.”

Loar manufactures dozens of parts used in commercial and military aircraft, and estimated in the filing that 85% of its $317 million in sales last year came from “proprietary products where we believe we hold market-leading positions.”

The company said in the filing that its two biggest revenue streams in terms of individual families of aircraft are the Airbus A320 family and the Boeing (BA) 737 family of planes.

The filing projects Loar had about $28 million in cash or cash equivalents in the latest quarter ended March 31, along with just under $538 million in total debt.

Loar Operates on Thin Margins

According to the filing, Loar has turned just two profitable years since 2012, posting income of about $6 million in 2014 and just over $1 million in 2015. While revenue has increased to $317 million last year from just under $9 million in 2012, Loar has operated on thin margins and hasn’t been profitable for many years.

Loar has also acquired 16 companies since its founding in 2012, targeting companies “with proprietary products and/or processes, leading market positions, significant aftermarket potential, strong revenue synergies with potential for cross-selling and strong customer relationships.”

For the first quarter of 2024, Loar estimates that it generated between $89.84 million to $91.84 million in sales, with projected net income of $1.63 million to $2.25 million.

Loar’s IPO Comes as IPO Market Heats Up

While not as high profile as some other IPOs like Reddit’s earlier this year, Loar’s IPO comes as the market for IPOs picks up this year after a slow 2023 for new listings.

Overall, IPO activity was up in several markets around the world in the first quarter, according to a report last month from EY. There were 16 more IPOs in the U.S. in the first quarter of 2024 than in that period of 2023, generating $5.8 billion more in proceeds, the report found.

A number of private equity firms surveyed for the report said they believed reductions to interest rates could help increase IPO activity in the latter part of this year, but Federal Reserve Chair Jerome Powell suggested earlier this week that interest rates could stay higher for longer in response to recent inflation data.