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Jan. 31, 2020, 11:58 a.m. EST

Reynolds Consumer shares soar after its portfolio of everyday goods goes public in $1 billion-plus IPO

Reynolds Consumer portfolio includes Hefty and the namesake Reynolds brand

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By Tonya Garcia, MarketWatch


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Reynolds Consumer says it continues to innovate on products that many consumers have known much of their lives

Reynolds Consumer Products Inc. is now a publicly-traded company on the Nasdaq, with jumping nearly 6% immediately after trading began.

The company, which has portfolio of well-known consumer products, offered 47.17 million shares priced at $26 a share, the midpoint of the $25 to $28 per share range the company had previously set. If the underwriters, led by Credit Suisse, Goldman Sachs and J.P. Morgan, exercise all the options to buy additional shares, Reynolds Consumer could raise up to $1.52 billion.

The first trade for the stock was at $27.50 at 10:36 a.m. Eastern for 6.5 million shares.

Reynolds went public at a time that the Renaissance IPO ETF /zigman2/quotes/207665280/composite IPO -3.67%   has rallied 10.9% over the past three months, while the SPDR Consumer Staples Select Sector ETF /zigman2/quotes/200697959/composite XLP -4.07%   has gained 4.2% and the S&P 500 /zigman2/quotes/210599714/realtime SPX -4.42%   has advanced 6.9%.

Unlike other recent IPO candidates, Reynolds Consumer /zigman2/quotes/216150988/composite REYN -3.27% is profitable and has a decadeslong history of making and selling everyday goods. Items like Reynolds Wrap, which was introduced in 1947, and Hefty bags can be found in 95% of households across the U.S., according to the company’s prospectus.

Moreover, the company says it has customer relationships across major grocery stores, mass merchants and warehouse clubs, like Costco Wholesale Corp. /zigman2/quotes/201191698/composite COST -4.11% , home improvement retailers like Home Depot Inc. /zigman2/quotes/208081807/composite HD -4.48% , and of course it sells its product online.

“E-commerce penetration is expected to increase, due to the convenience of online ordering and subscription delivery, particularly for easy-to-ship household product categories,” the prospectus said. “Furthering our e-commerce strategy, we recently launched a full line of store brand aluminum foil, trash bags and food storage bags as the exclusive supplier to the e-commerce leaders.”

Sales to Reynolds Consumer’s top 10 customers were responsible for 69% of fiscal 2018 revenue. Walmart Inc. /zigman2/quotes/207374728/composite WMT -2.97% and Sam’s Club accounted for 28% and 12% of revenue that year, respectively.

Based in Lake Forest, Ill., the company’s majority shareholder is New Zealand’s Packaging Finance Limited (PFL), which will remain the controlling shareholder once the deal has closed.

See: Casper Sleep’s IPO expected to test appetite for loss-making unicorns

Nearly two-thirds (65%) of the company revenue for the year ending December 31, 2018 came from products that hold the top market share position for the category, the company said. This includes Reynolds Wrap aluminum foil in the U.S., Reynolds Kitchens parchment and wax paper, and Hefty foam dishes and party cups.

The company has four operating segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto products.

In Canada, Reynolds Consumer sells its cooking and baking products under the Alcan brand, and outside of North America, under the Diamond brand. Alcan aluminum foil holds the top market share position in Canada, according to the prospectus.

Reynolds Consumer recorded net income of $135 million on revenue of $2.20 billion over the nine months ended Sept. 30, compared with net income of $92 million on revenue of $2.24 billion in the same period a year ago.

Read: One Medical is going public: 5 things to know about the primary-care startup

The consumer product categories that Reynolds Consumer plays in have an average growth rate of 3.4% year-over-year.

Key competitors include Clorox Co. /zigman2/quotes/206443229/composite CLX +0.40% and S.C. Johnson & Sons Inc.

Though Reynolds Consumer has been around for ages, the company is still looking for the next new thing. It thinks it was the first to launch a food storage bag, the first to add a slider closure to those bags and the first to put a drawstring on trash bags.

“Our product innovation pipeline focuses on use occasions including meals and snacks on-the-go as well as sustainability and the needs of the millennial consumer,” the prospectus said.

/zigman2/quotes/207665280/composite
US : U.S.: NYSE Arca
$ 31.51
-1.20 -3.67%
Volume: 57,879
Feb. 27, 2020 8:00p
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/zigman2/quotes/200697959/composite
US : U.S.: NYSE Arca
$ 59.16
-2.51 -4.07%
Volume: 39.09M
Feb. 27, 2020 8:00p
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/zigman2/quotes/210599714/realtime
US : S&P US
2,978.76
-137.63 -4.42%
Volume: 3.94B
Feb. 27, 2020 5:20p
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/zigman2/quotes/216150988/composite
US : U.S.: Nasdaq
$ 29.00
-0.98 -3.27%
Volume: 665,877
Feb. 27, 2020 4:00p
P/E Ratio
23.12
Dividend Yield
N/A
Market Cap
$5.88 billion
Rev. per Employee
N/A
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/zigman2/quotes/201191698/composite
US : U.S.: Nasdaq
$ 293.13
-12.56 -4.11%
Volume: 3.63M
Feb. 27, 2020 4:00p
P/E Ratio
34.75
Dividend Yield
0.89%
Market Cap
$129.49 billion
Rev. per Employee
$600,967
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/zigman2/quotes/208081807/composite
US : U.S.: NYSE
$ 224.73
-10.55 -4.48%
Volume: 7.61M
Feb. 27, 2020 6:30p
P/E Ratio
21.92
Dividend Yield
2.42%
Market Cap
$245.14 billion
Rev. per Employee
$261,993
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/zigman2/quotes/207374728/composite
US : U.S.: NYSE
$ 110.40
-3.38 -2.97%
Volume: 9.49M
Feb. 27, 2020 6:30p
P/E Ratio
21.28
Dividend Yield
1.96%
Market Cap
$313.23 billion
Rev. per Employee
$223,654
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/zigman2/quotes/206443229/composite
US : U.S.: NYSE
$ 168.70
+0.67 +0.40%
Volume: 4.31M
Feb. 27, 2020 6:30p
P/E Ratio
26.51
Dividend Yield
2.51%
Market Cap
$21.10 billion
Rev. per Employee
$717,701
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