Just the ticket
Private equity’s return on investment is driven by finding a profitable route to exit in the shortest number of stops. KKR and a trio of minority financial investors proved the perfect passengers for UK train ticket reseller Trainline to exit a nearly five-year investment within as many months and in three simple steps.
Having listed 65% of the business in a £1.1bn London IPO in June priced at 350p, the stock had gained nearly 40% to peak at 489p on September 13, pretty much begging the sponsors to take money off the table.
But the shareholders were locked up for six months post-IPO. As the lock-up was due expire on December 23 that effectively meant another sale was not due until 2020.
Investors navigate around share lock-ups and so they are not waived lightly. JP Morgan and Morgan Stanley, global coordinators on the float alongside KKR’s in-house team, had significant comfort from incoming calls by investors seeking more stock. Much of it poured in after Trainline raised guidance in a trading update on September 12 for full-year revenue growth to the low-to-mid 20% range.
A wall-crossing exercise with core shareholders on the morning of September 19 provided further confidence, with the stock’s entry into the FTSE 250 index the following Monday being another reason to press on.
On offer was half of the remaining 24.8% post-IPO stake held by KKR, Index Ventures, Ares and Alven Capital, representing approximately 67 days’ trading. While this was only the second opportunity to buy stock it was also clearly the penultimate chance, typically the hardest block to sell. Pricing of 435p was a 6.9% discount to the market price, relatively standard at the time, but impressive given how much of the company was being sold so quickly after the IPO and raised £285m for the sellers.
This ABB owed a debt to the success of the IPO that priced in the top quartile of the range despite an upsize and the resignation of the UK prime minister during pre-marketing. Exposure to UK consumers was offset by structural growth, a technology-driven platform and asset-light business. The company was also positioned as a marketplace rather than a travel booking platform, giving a higher valuation benchmark. The ABB priced at 20.5 times estimated EV/Ebitda for full-year 2021.
The final book consisted of around 90 lines and approximately 60% was snapped up by wall-crossed accounts.
The original lock-up was retained but was broken again when the pre-IPO investors completed their exit on November 11. The discount to market was larger on the final sale at 7.2%, making the September sale even more impressive.
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