Setting Our Sights On The SiteOne Landscape IPO

Based in Roswell, Georgia, SiteOne Landscape Supply Inc. (NYSE: SITE) has filed for an IPO, set for this Thursday, 5.12, with a proposed maximum offering price of $100 million. The company distributes landscape supplies through its subsidiaries in the United States and Canada.

We previewed the IPO last week for those looking for an early glimpse.

SiteOne Landscape Supply will offer 10 million shares at an expected price range of $20 to $22.

SITE filed for the IPO on August 18, 2015.

Lead Underwriters: Deutsche Bank Securities, Goldman Sachs, and UBS Investment Bank

Underwriters: Academy Securities, Barclays Capital, HSBC Securities, ING Financial Markets, Natixis Securities, RBC Capital Markets, Robert W. Baird & Co., SMBC Nikko Securities America, SunTrust Robinson Humphrey, and William Blair & Co.

Business Summary: Distributor of Landscape Supplies in the U.S. and Canada

As described in company SEC filings, SiteOne Landscape Supply distributes landscaping supplies and materials through its subsidiaries in the United States and Canada. Its products include landscape accessories, irrigation supplies, herbicides, fertilizer and control products, turf protection products, turf care equipment, grass seed and golf course maintenance supplies. In addition, the company provides nursery goods and hardscapes including natural stones, pavers, and blocks, ice melt products and outdoor lighting.

(Source)

SiteOne Landscape Supply also offers landscape consultation services to its clients. The company markets its products to residential customers and commercial landscape professionals. In particular, these customers specialize in the design, installation, and maintenance of lawns, golf courses, gardens and other outdoor spaces.

SiteOne Landscape Supply is the largest and only national wholesale distributor of such products and materials in the United States. Their North American network includes 477 branch locations in 44 states and five Canadian provinces. Their product portfolio has over 100,000 stock keeping units, and the company estimates that it is approximately four times the size of its largest competitor.

They have a broad and diverse customer base of over 180,000 clients, and the top 10 customers accounted for around 5 percent of net sales in fiscal year 2015. No single customer represents over 2 percent of net sales, showing diversification and risk mitigation. Their largest suppliers include NDS, Vista, Dow AgroSciences, BASF, Syngenta, Bayer, Oldcastle, Toro, Rain Bird, and Hunter. OneSite Landscape Supplies also has proprietary brands under the names Lesco and Green Tech; these accounted for approximately 21 percent of sales in fiscal year 2015.

(Sales distribution in US FY2015)

Only selling stockholders are selling shares in this IPO, and they will receive all of the net proceeds from the initial public offering. The company will not receive any proceeds.

Executive Management Highlights

CEO and Director Doug Black also serves as CEO of John Deere Landscapes. His previous experience includes positions at Oldcastle and McKinsey & Company. He served in the U.S Army as an engineer officer, and he earned an MBA from Duke University's Fuqua School of Business as a Fuqua Scholar and a BS in Mathematical Science/Civil Engineering from the U.S. Military Academy, West Point.

CFO John Guthrie is also CFO, VP and Secretary of John Deere Landscapes. He joined SiteOne in 2001 as Head of Finance. He has held positions in engineering and manufacturing at Commonwealth Edison and Turtle Wax. Mr. Guthrie earned B.S. in Chemical Engineering from the University of Illinois and an M.B.A. from the University of Chicago.

Potential Competition: Ewing, Imperial Sprinkler Supply, Atlantic Irrigation and Others

SiteOne Landscape Supply faces competition primarily from other wholesale landscape supply distributors, many of which are small, local, privately-owned distributors. The top nine largest competitors include Ewing, Harrell's Horizon Distributors, Imperial Sprinkler Supply, Atlantic Irrigation, Central Turf and Irrigation Supply, FIS Outdoor, and Longhorn.

Financial Highlights: Strong Top, Bottom Line Growth

OneSite Landscape Supply provided the following figures from its financial documents for prior years:

As of Jan 3., 2016:

Conclusion: Consider Buying In

With a 23% increase in net sales end 2014-start 2015 and 33% increase in net income over the same time period, we are bullish on SITE's growth and potential moving forward.

This is a unique business (among mostly healthcare deals in 2016), with a leading industry position and new expansion into Canada.

Risks do include a cyclical industry, tied to residential and commercial construction sectors, and a heavy dependence on weather conditions.

All told, we look forward to the deal, also bolstered by a huge underwriting team.