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Jul. 30, 2002
Big 5 Gets an Assist From Irell in $120 Million IPO
Los Angeles' Irell & Manella assisted Big 5 Sporting Goods Corp. in its June 24 initial public offering that brought in nearly $120 million for the El Segundo-based retailer.
Los Angeles' Irell & Manella assisted Big 5 Sporting Goods Corp. in its June 24 initial public offering that brought in nearly $120 million for the El Segundo-based retailer.
Andrew Gross, who served as lead attorney for Big 5, says the offering was delayed 10 months because of the market downturn following the Sept. 11 terrorist attacks.
Typically, a company likes to move quickly through the offering process or, as Gross puts it, "You want to get while the getting's good." Big 5, however, was forced to put its offering on hold until market conditions improved.
Big 5 waited until June to set off on its two-week road show to attract the best price from its underwriters and then on June 19 set its pricing date for five days later.
Credit Suisse First Boston served as the lead manager of the offering, with U.S. Bancorp Piper Jaffray Inc., Jefferies & Company Inc. and Stephens Inc. acting as co-managers. Skadden, Arps, Slate, Meagher & Flom, led by Los Angeles partner Gregg Noel, represented the underwriters.
The underwriters originally set the 7.7 million shares at $14 to $16 per share. Just as Big 5 was to set its offering price, however, the market fell again, forcing it to drop the price per share to $13.
The company, which operates 260 stores in California and nine western states, was unsure whether the lower price would bring in enough cash.
"If the underwriters didn't choose the overallotment, they wouldn't have enough money to do what they wanted," Gross says.
Anxious about the overallotment, Big 5 asked its largest shareholder, Green Equity Investors, to buy 350,000 registered shares to ensure that the retailer had the funds needed. With this sale, the number of shares in the offering increased to 8.05 million.
Big 5's worries proved groundless as the underwriters exercised their overallotment, pushing the offering's total value to $119.7 million.
"If they knew that the underwriter would do the overallotment, they wouldn't have done the buy by Green Equity," Gross says.
Gross, who first represented Big 5 in a recapitalization transaction in 1997, expects that he will be involved with the company for many years.
Stefanie Knapp
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