After foregoing plans for an initial public offering, Smile Brands Group Inc., a dental services company backed by Freeman Spogli & Co., will get a new private equity owner in Welsh, Carson, Anderson & Stowe.
The price of the secondary buyout was not disclosed. However, the Santa Ana, Calif., company said in April that it hoped to go public with an enterprise value of about $470 million, or 8.3 times the company’s 2009 adjusted Ebitda of $56.7 million. Smile Brands provides dental equipment and services under three brands: Bright Now! Dental, Castle Dental and Monarch Dental.
The actual price may have been a bit lower, based on public company comparables. Gregg Blake of Brocair Partners LLC estimated that the sale price was within a $350 million to $450 million range, or about 6 to 8 times Ebitda. He said that the company’s competitors, Birner Dental Management Services Inc. and American Dental Partners Inc., are trading at 7 times Ebitda and 5 times Ebitda, respectively.
In April, Smile Brands had filed to go public, under the symbol GRIN, at $17 a share, targeting about $133 million of gross proceeds at the midpoint of its price range. However, it withdrew the offering in May, citing market conditions. At the time several private equity firms had also withdrawn their IPOs, including Americold Realty Trust, owned by affiliates of Ronald Burkle’s Yucaipa Cos. LLC.
Freeman Spogli, along with several other investors, acquired the company from Gryphon Investors for $340 million in May 2005. Freeman Spogli retained a 73% stake in the company; California State Teachers’ Retirement System kept 9.8%, while A.S.F. Co-Investment Partners II LP and Gryphon Investors each retained a 6.5% stake.
Information provided in the IPO prospectus suggests that private equity investors collectively invested about $150 million of equity, with Freeman Spogli putting in about $130 million. Had Smiles Brand gone public at $17 a share, Freeman Spogli’s investment would have been valued at about $200 million.
Dental companies have been popular acquisition targets in recent months. This summer Chicago private equity firm Code Hennessy & Simmons LLC invested an undisclosed amount in Heartland Dental Care Inc. Also, Los Angeles-based private equity firm Leonard Green & Partners LP bought Aspen Dental Management Inc. for $550 million from Ares Management LLC.
Overseas, London and Stockholm private equity firm IK Investment Partners in June acquired Scandinavian dental care provider Colosseum Dental AS from Norwegian financial firm Trallfa Industrier AS for undisclosed terms.
A few are up for sale. DFW Capital Partners is shopping its portfolio company, Garden State Dental Associates LLC, a chain of dental offices specializing in orthodontics and cosmetics, while Sentinel Capital Partners and Audax Group have hired a banker to sell ReachOut Healthcare America, a provider of oral health services.
“If you look out among these companies, the investments are anywhere from three to six years old, ” said Blake, adding that, “a lot of the ones in that vintage would be on track for an exit right about now.”