FOX shares jump more than 24 percent on first day of trading

Photosscs080813jpfoxipoSanta Cruz Sentinel

SCOTTS VALLEY — A snowmobile with high-end FOX suspension shocks jumped over a sea of businessmen in suits — and one woman — in New York City’s Times Square Thursday morning to mark the Scotts Valley company’s first day of public trading on the Nasdaq Global Select Market.

“You don’t see that every day in Manhattan in August,” said Larry Enterline, chief executive officer for Fox Factory Inc.

Enterline and other company executives had taken a red-eye flight to New York for the company’s initial public offering, which while usually marked by a company executive symbolically ringing the Nasdaq bell, instead featured them standing between jumping ramps on 43rd and Broadway. Enterline said the ramp jump by world-record holding athlete, Levi LaVallee, had the desired effect.

“We were looking for something that would help tell our story,” he said.

The initial public offering opened at $15 a share to raise a total of about $127.5 million to $142.5 million for Fox and private stockholders, according to Compass Diversified Holdings, a publicly owned investment management company that is a majority owner of Fox.

From the IPO, Fox will receive about $40 million, which will go toward paying off about $61 million in outstanding debt. With the help of a new credit facility, Fox should be debt-free by the end of the year, Enterline said.

Shares, trading under the new ticker FOXF climbed to a high of $19.47 during the day and closed at $18.61, more than 24 percent up from its opening bid.

“We feel pretty good about the IPO,” Enterline said. “It priced well and clearly has traded well today. That’s all you can hope for at this stage.”

NEW CHAPTER

Going public helps remove uncertainty inherent in a private equity relationship, opens access to capital at a lower cost and makes it easier to compete for technical talent at a high level, Enterline said.

“A company reaches a certain stage of growth and it’s time to leave the nest so to speak and get on our own and get our own identity,” he said.

Fox, founded in 1974 by Robert Fox, a motocross-riding engineer, has captured the high-end market for shocks that are used in mountain bikes, all terrain vehicles, snowmobiles and other off-road vehicles. The products are sold in more than 40 countries. While about two-thirds of sales come from mountain bike-related products, the company’s motor vehicle segment is now growing faster than bicycles, Enterline said.

Going public won’t change the company, he said.

“At the core of the company, we’re still going to come in every day and design and manufacture great products.”

The company employs more than 1,000 people globally, about 120 who work in the Scotts Valley headquarters. The Scotts Valley office can expect to grow to accommodate issues of being a public company, Enterline said.

“We’ve been hiring people every year,” he said.

Enterline declined to state how many people work in manufacturing facilities in Watsonville. In 2010, prior to the company moving its headquarters to Scotts Valley, about 400 employees were in South County. Last year, Fox opened its own manufacturing plant in Taiwan, transferring much of its bicycle product operation from the 86,000-square-foot Watsonville operation overseas to be nearer to customers.

There are no immediate plans to shutter the Watsonville facility, however. It is increasingly focused on building motor vehicle products and work has spilled into satellite offices in South County. Enterline said he hopes to consolidate operations.

“We anticipate keeping our manufacturing footprint in Watsonville for the foreseeable future,” he said. “It’s conceivable at some point we could open a manufacturing plant in another country but we’ve put a lot of money into that facility in the last two years. We want to keep it as full as we can.”

COMPASS GROUP

For Compass, which bought a majority interest in Fox in 2008 for about $80 million, the IPO “represents a major milestone” because it is the first subsidiary in the investment company’s seven-year history to go public, said Alan Offenberg, chief executive officer of Compass Group Diversified Holdings LLC.

It “is a testament to the considerable strength of our business model,” Offenberg told analysts on a webcast earnings call Thursday morning.

The Compass Group, as selling stockholder, expects to raise $66 million to $81 million in the IPO and still maintain majority ownership in the company. Compass is also the majority investor in CamelBak, Advanced Circuits, American Furniture Manufacturing, Arnold Magnetic Technologies Holdings Corp., ERGObaby, Liberty Safe and Tridien Medical.

The IPO represents “an exceptional return to date on behalf of our owners,” Offenberg said.

In May, when the company opened its own Fox historical museum in Scotts Valley, the founder said his dream hadn’t been to build a big company.

“I just wanted to make great shocks,” Robert Fox said on a video posted on YouTube. “This just started out as one guy who loved motocross and he loved engineering and he was lucky enough to be able to find a way to combine them into a career and into this company.”

Follow Sentinel correspondent Jennifer Pittman at Twitter.com/jenniferpittman

 

Fox Factory Holding Corp.

WHAT: Fox Factory Holding Corp. is the holding company of Fox Factory Inc., a designer, manufacturer and marketer of high-performance suspension products for mountain bikes, all terrain vehicles, snowmobiles and other off-road vehicles. Fox sells to other manufacturers as well as retailers and distributors.
HEADQUARTERS: 915 Disc Drive, Scotts Valley, CA 95066
INFORMATION: (831) 274-6500; www.ridefox.com
HISTORY: Robert C. Fox Jr., an engineer and motocross racer, developed a new kind of high-end suspension product and began producing them in 1975. The company was incorporated in California in 1978. In 2007, the company, under a new holding company, incorporated in Delaware. It was acquired the following year by Compass Group Diversified Holdings LLC.
LEADERSHIP: Larry L. Enterline, chief executive officer.
EMPLOYEES: The company employs more than 1,000 people worldwide, including more than 120 in the Scotts Valley headquarters.
STOCK: Shares trading on the NASDAQ under the new ticker FOXF opened Thursday at $15 and closed at $18.61.
FINANCIALS: Sales in 2012 were $235.9 million and net income was $14.2 million.
GUIDANCE: Enterline said the company would grow in the high single digits to the low double digits annually over the next three to five years.

This article on Fox Factory’s IPO was first printed here.

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