WageWorks prices its IPO

WageWorks Inc., the provider of human-resources services for 37 Fortune 100 members including Ford Motor Co. and Morgan Stanley, is planning an initial public offering this week that will value the company at more than five times its peers.

• The price range of WageWorks's offering was lowered to $8 to $9 on Thursday from a previous goal of $12 to $14, a clear sign that investors weren't lining up for this deal at the original valuation. The company slashed the offering price for its shares by more than a third.
• Later that same day (Aug 4) WageWorks Inc. postponed its initial public offering after U.S. stocks posted their biggest daily decline in more than two years.

The company, which provides private, membership-based medical services at members' workplaces or homes, is considered an add-on benefit targeted at self-insured employers and individuals. Its customers pay a monthly or annual fee, and individuals pay $35 per visit, in exchange for convenient access to basic primary care or certain chronic care issues.

IPO details:
WageWorks, Inc. (filed 25-Apr-11)
Based in San Mateo, CA
Primary Industry: Outsourced Human Resources Services
2010 Sales: $115.0 mil
2010 Employees: 844
Proposed Ticker: WAGE
Offering Amount: $75.0 mil
Lead Underwriter: Credit Suisse Securities (USA) LLC

The San Mateo, California-based company is offering 5.77 million shares for $12 to $14 each to raise about $81 million, according to a filing with the U.S. Securities and Exchange Commission. The midpoint of the IPO range values WageWorks at about 2.8 times last year's sales. That's more than the average of about 0.5 times sales among 17 U.S.-listed human-resources services companies with a market value of less than $1 billion, data compiled by Bloomberg show.

WageWorks, whose services allow a company's employees to set aside pretax wages to pay for health-care and commuting expenses, may struggle to obtain the valuation it's seeking after the Standard & Poor's 500 Index declined seven out of the past eight trading days. The company also faces new U.S. health- care laws that limit the use of flexible spending and health savings accounts, two of WageWorks' services.


WageWorks, which says it competes with U.S. health insurer Aetna Inc. and Automatic Data Processing Inc., would be valued at about $325 million at the midpoint of its price range.

Sales at WageWorks rose 20 percent in the six months through June to $69.2 million from a year earlier, primarily because of takeovers, the company said in its filing. Full-year sales in 2010 were $115 million, 6 percent higher than the previous year.

Growth Strategy

WageWorks' growth strategy includes buying smaller operators, and the company has made four acquisitions since 2007 to add clients and services, according to its filing. Purchases have included Creative Benefits in September 2008 and Fringe Benefits Management Co. in November.

Customers access WageWorks benefit programs through Web- based software, which allows the company to enhance its products quickly, it said in its filing. This "on-demand" business model also requires less up-front investment by customers compared with services that require on-site software installation, it said.

IPO Proceeds

The company initially filed in April, joining a flood of companies to announce plans for IPOs in the second quarter of this year. WageWorks General Counsel Kimberly Jackson declined to comment, citing the pre-IPO quiet period.

Proceeds from the offering will be used for working capital and general corporate purposes, the filing showed.

Owners of WageWorks include VantagePoint Capital Partners, Advent International Corp. and Camden Partners. All of the shares in the offering are being sold by WageWorks.

Credit Suisse Group AG and William Blair & Co. are leading the offering, according to the filing. The shares are scheduled to begin trading tomorrow on the New York Stock Exchange under the symbol WAGE.