Hudson Ltd., operator of the Hudson “travel essentials” and bookstores found at airports across the U.S. and Canada, set terms for its planned initial public offering on Friday, saying it will sell 34.9 million shares priced at $19 to $21 a pop.
The company plans to list its shares on the New York Stock Exchange under the ticker symbol “HUD.” Credit Suisse, Morgan Stanley, UBS, BofA Merrill Lynch and Goldman Sachs are lead managers, with Banco Santander, BBVA, BNP Paribas, Crédit Agricole, HSBC, Natixis, Raiffeisen Centrobank and UniCredit acting as co-managers.
Hudson, which started with just five Hudson News stores at a single airport in New York City in 1987, now has 989 stores in North America, most of them in airports and at other transport hubs.
Here are 5 things to know about Hudson ahead of its IPO:
It won’t receive any of the proceeds of the deal
Hudson won’t receive any proceeds from the deal, according to its prospectus. That’s because the shares are all being offered by its parent, Dufry AG
, a Swiss company that operates travel retail shops in 645 countries.
Dufry has earmarked the proceeds to pay down its own debt. The parent company intends to retain full control of Hudson once the deal is completed, making Hudson a “controlled company” under NYSE rules, which exempts if from certain reporting requirements.
Dufry’s grip on the company will be further cemented by a dual-class structure, under which Class A shares, those to be offered in the IPO, will carry one vote, while Class B shares, those held by Dufry, will come with 10 votes each. That will give Dufry 93.1% of voting rights, once the deal has been completed.
It’s bigger than you think
Hudson operates book shops, duty-free stores, convenience stores, specialty stores, electronics stores, themed stores and food and drink outlets, mostly in airports and other transport hubs. The company has more than a million square feet of commercial space from which it conducts almost 120 million transactions a year.
Hudson is planning to expand into nontraditional locations such as hotels and tourist attractions, including Las Vegas casinos. It is open to making acquisitions, as long as they boost earnings. Preliminary sales estimates for the fourth quarter range from $435 million to $445 million, up from $405 million in the year-earlier period. Final, audited numbers are not available — and they won’t be until after the IPO.
It’s one of few players to benefit from enhanced security at airports
Passengers may hate the endless queuing, document checks and X-ray machines, but Hudson enjoys a clear benefit from enhanced security measures at airports, according to its prospectus. People now typically arrive hours earlier than their scheduled flight departures to get through security, and that gives them more time to shop and eat.
So-called dwell times in midsize and large U.S. airports average 66 and 75 minutes, respectively, states the prospectus, citing the 2016 Airport CouncilB.
People going on vacation are more likely to spend money and can be enticed to make impulse purchases at airport stores. Cutbacks by airlines on snacks and beverages and such items as headphones are another catalyst for sales, while growing passenger numbers are another positive.
It has no plans to pay a dividend
Hudson has no plan to reward shareholders with a dividend, which means investors will have to rely on share-price appreciation for returns on their investments. Its prospectus also notes that it is incorporated in Bermuda, which has different shareholder rights than do other jurisdictions. A number of its directors — and assets — are located outside of the U.S., which may make it difficult for investors to take legal action against them, or have judgments made by U.S. courts enforced.
It had accounting trouble before
“We identified a material weakness in our internal control over financial reporting in connection with the preparation of the combined statement of cash flows for the year ended December 31, 2014, for this offering,” the company says in the prospectus.
The issue related to the determination and presentation of cash flows made in accounting for business combinations. The company restated cash flows for 2014 to correct the error, and it is planning measures to address the material weakness. However, according to Hudson, “the implementation of these measures may not fully address this material weakness, and therefore we would not be able to conclude that it has been fully remedied.”
Dufry’s American depositary receipts have gained 8.4% in the last 12 months, while the S&P
has gained 24%.