Chicago-based Azek Co. Inc., a composite decking and building products manufacturer, raised $765 million by offering 33.3 million shares at $23 as it launched its initial public offering.
That's 2 million shares more than expected, priced above the anticipated range of $19 to $21, which would have raised $625 million and been used mostly to pay down debt.
At this pricing, Azek commands a fully diluted market value of $3.4 billion, according to Renaissance Capital.
The manufacturer of cellular PVC and composite decking, PVC trim and other outdoor building products began selling Class A common stock June 12 on the New York Stock Exchange under the ticker symbol AZEK.
Azek plans to use proceeds from its IPO to redeem senior notes then prepay the outstanding principal, according to its prospectus. Azek's total debt of $1.25 billion includes $804.3 million under a term loan credit agreement, $129 million under a revolving credit agreement and $315 million of 2013 notes.
After paying down debt, the prospectus says any additional proceeds raised in the IPO will be used for general corporate purposes, including working capital, operating expense, capital expenditures, acquisitions or other strategic investments.
Founded in 1983, Azek, formerly CPG Newco LLC, generally holds one of the top two market share positions by revenue in its product categories. Azek saw sales increase 16.5 percent to $794.2 million for the fiscal year that ended Sept. 30, 2019.
The company manufacturers Azek, TimberTech and Versatex brand decking, rail, trim and specialty products for the residential segment, which generated sales of $655 million, as well as Scranton and Vyvom brand sheet products, bathroom partitions and lockers for the commercial segment, which brought in $139 million.
Net sales for the 2019 fiscal year had increased by $112.4 million compared to 2018 thanks to an increase in organic sales volume and $50.8 million from the acquisitions of Versatex Holdings LLC, which broadened Azek's lines of cellular PVC exterior trim and mouldings, and Wes LLC, which designs and sells aluminum railing branded as Ultralox.
However, Azek posted a loss of $20.2 million because the cost of sales increased by $61.2 million to $541 million for the last fiscal year. Azek says it had expenses of $43.4 million related to the higher organic sales volumes, $35.7 million due to higher acquisition sales volumes, and $5.3 million of startup costs for a polyethylene recycling facility.
Azek plans to increase the amount of recycled materials in its deck boards, which exceeded 200 million pounds last year, by more than 25 percent in fiscal 2020. Two of the company's decking lines, TimberTech PRO and Edge, are made from about 80 percent recycled material.
Azek says there is a significant opportunity for composite decking to take market share from wood as consumer awareness about sustainable materials increases and advances in material science and manufacturing improve the range of colors and textures available.
The company also is benefiting from the trend to extend the total livable space of a residence to the outdoors with a unique deck space for relaxing and entertaining as well as consumer demand for low-maintenance deck boards.