The denim company is seeking a valuation of $5.8 billion at the midpoint of its proposed range of $14 to $16 a share, which would make it one of the largest retail and consumer-products IPOs of the past decade.
The IPO is set to raise $550 million, excluding an underwriters’ allotment, at the midpoint of the range. The majority of the proceeds—roughly $408 million—would go to selling shareholders, who are mostly descendants of founder Levi Strauss and will maintain control of the company. The rest, or $142 million, would go to the company.
The backdrop for Levi’s IPO could hardly be better for a new issuer as stocks are trading near record highs with relatively low volatility, and the S&P 500 Retailing index is up more than 10% this year.
Public offerings for retail and apparel companies have been relatively rare in recent years. One notable exception was Canada Goose Holdings Inc., which was much smaller than Levi Strauss at its IPO valuation of roughly $1.3 billion, according to Dealogic. Its shares have risen more than 300% since their 2017 offering.
While others in the industry have been battered as shopping patterns evolve, Levi Strauss has managed to post relatively strong growth lately. It had $5.6 billion in net revenue and $285.2 million in net income in the fiscal year ended Nov. 25, 2018, up from $4.9 billion and $284.5 million, respectively.
The company was taken private in 1985 in a leveraged buyout by descendants of the founder, who in 1853 opened a dry goods store in San Francisco and sold work pants to miners during the California Gold Rush.
Mr. Strauss had no children and left the business to his four nephews and other family members. Their descendants ran the company for decades, and one of them remains a director.
While Levi Strauss has touted the sophistication of its manufacturing and technology in pitch meetings with investors, it’s squarely a retail and apparel company with most of its sales coming from its bluejeans and Dockers khaki pants.
Still, the San Francisco company will look like many tech companies in one important way when it starts trading on the New York Stock Exchange: It will debut with a dual-class structure that gives the controlling Haas family a separate class of stock with 10 votes per share, compared with one per share for new stockholders.
Because of that, the Haas family will have significant influence over major decisions, ranging from the election of directors to whether to make an acquisition or one day sell out to a competitor. Many stock indexes have banned newly public companies with dual-class structures, which governance advocates frown upon.
Some of the biggest public tech companies that have made their debuts in recent years, including Facebook Inc., Google parent Alphabet Inc. and Snap Inc., have supervoting structures that give their founders control. Lyft, which is set to debut next week, will also have a supervoting structure in place.
Dual-class voting stock is more rare in retailing, but Ralph Lauren Corp. and Under Armour Inc. are two notable exceptions, giving the respective founders Ralph Lauren and Kevin Plank outsize control.
Levi Strauss is returning to the public markets at a time of intense scrutiny for retail and apparel brands, many of which have struggled to adapt to changing shopper habits. The internet has reduced the barriers to entry, allowing a bevy of online startups to siphon customers from established brands. At the same time, the growing dominance of Amazon.com Inc. has pressured traditional chains to lower prices and speed delivery times, which has eaten into profits.
Some established players have sought to weather the storm out of the public eye. The founding Nordstrom family tried to take the department store chain private in 2017, but was unable to raise enough financing at attractive rates.
Other brands have diversified through acquisitions, including Michael Kors, which changed its name to Capri Holdings Ltd. after buying the Jimmy Choo and Versace brands. Likewise for Coach, which renamed itself Tapestry Inc., after acquiring Kate Spade and Stuart Weitzman.
In its IPO filing, Levi Strauss said it was looking to make acquisitions that would “drive further brand and category diversification.”