Safety testing group UL Solutions plans one of largest IPOs of the year

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UL Solutions, a Chicago-based safety testing and certification group, is pushing ahead with plans for one of the largest initial public offerings of the year despite a mixed reception for recent listings, with a deal that is set to value the company at more than $5bn.

The company is aiming to raise as much as $1bn for its non-profit owner through a listing on the New York Stock Exchange, according to three people familiar with the plans. The people said the deal could come as soon as November, though the timing and valuation are still subject to change.

That would make it one of the biggest listings of 2023 by amount raised. Just seven companies have raised more than $500mn in an IPO this year, according to Dealogic data, with three — Arm, Kenvue and Birkenstock — raising more than $750mn.

The potential deal would come at an uncertain time for the US IPO market. Fundraising volumes had been gathering pace after a long downturn, with a flurry of deals in September and October raising hopes of a return to normality.

However, confidence has been set back by weak post-IPO trading for several of the recent deals. Arm, Instacart, Klaviyo and Birkenstock — the four largest listings of this autumn — have all fallen below their offering prices.

Several companies that aimed to list before the end of the year have discussed delaying their plans in response, according to bankers and investors. 

However, UL Solutions is considered to be relatively less risky than many classic IPO candidates, given its long history of profitability and investment-grade credit rating. The company declined to comment.

UL Solutions is owned by the non-profit group UL Standards & Engagement. It is part of a broader network, formerly known as Underwriters Laboratories, that also includes an organisation focused on safety research and one that creates safety standards. The UL network traces its roots to a late 19th century effort to help insurance companies save money by testing electrical products for fire risk. 

The testing business, whose work ranges from testing mobile phone Sim cards to advising on wind farm projects, has been positioning itself for a public offering for several years. In 2019 it recruited Jennifer Scanlon, a chief executive with public company experience, to separately run the for-profit testing and certification business that had been split off from its non-profit owner.

The company announced it had filed a confidential preliminary prospectus with regulators earlier this month.

JPMorgan Chase and Goldman Sachs are lead underwriters on the deal.

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As a private company, UL Solutions does not publicly disclose financial results. However, a recent research note by debt rating agency S&P Global said it has annual revenue of more than $2.5bn and earnings before interest, tax, depreciation and amortisation of about $500mn.

Two people familiar with the IPO plans said the company had discussed a valuation of as much as $10bn, but a third said it was currently targeting a range of between $5bn and $7bn.

That range would put it roughly in line with the valuations of its largest peers, the European groups SGS, Bureau Veritas and Intertek, which have market capitalisations of about two times their annual revenue or 10 times ebitda.

Analysts have previously argued that UL Solutions could eventually command a premium to its rivals, as it would be attractive to fund managers whose mandates only allow them to invest in US-listed stocks.