UL Solutions' stock soars 21.5% in trading debut after upsized IPO priced at high end of range

By Ciara Linnane

Stock of the testing, inspection and certification company shines in its first day of trading on the New York Stock Exchange

The stock of UL Solutions, a testing, inspection and certification company, rose 21.5% in its trading debut Friday, after the upsized initial public offering priced at the high end of its $26 to $29 range.

The company raised $964 million by selling 33.8 million shares at $28 a pop, for a valuation of $5.6 billion.

The Northbrook, Ill.-based company's stock (ULS) is trading on the New York Stock Exchange under the ticker ULS.

Goldman Sachs (GS), BofA Securities (BAC) and JPMorgan (JPM) were the lead underwriters in a syndicate of 16 banks that worked on the deal.

UL Solutions is profitable and had net income of $276 million in 2023, down from $309 million in 2022. Revenue rose to $2.678 billion in 2023 from $2.520 billion, according to its filing documents.

The company traces its roots back to 1894 and the World's Fair in Chicago, where founder William Henry Merrill Jr. was sent by his employer, the Boston Board of Fire Underwriters, to assess fire risks.

That work led him to form Underwriters Electrical Bureau to test and certify the safety of products that use electricity.

The original company was set up as a nonprofit, but that changed in 2012, when it was split into a for-profit entity called UL Solutions, which provides testing and certification, and two nonprofits called UL Research Institute and UL Standards & Engagement.

"The owners realized they were sitting on a valuable asset and had the opportunity to separate it out as a for-profit business," Chief Executive Jenny Scanlon told MarketWatch in an interview.

Today, the company is expecting to benefit from a range of trends including electrification, the internet of things, sustainability and regulatory compliance, Scanlon said.

It expects to continue its streak of acquisitions, building on the 54 deals it has completed since 2021, she added.

Recent deals include one with a European industrial testing company with intellectual property relating to regulations in Europe around adoption of renewable energy and electric vehicles.

The company also acquired HBI Compliance Ltd. and its operating unit Healthy Buildings International, a U.K.-based health, safety and compliance company that tests for such things as indoor air quality, water quality and mold.

"We'll continue to look for opportunities that give us distinct areas and assets," Scanlon said.

The company decided to go public in the current market because it realized it was not an ordinary enterprise, given its 130-year history and growth rates of about 7% since 2011.

"We have a healthy balance sheet and very strong free cash flow, which positioned us to be the kind of high-quality investment that high-quality investors are looking for. It made sense to go now and be on the forefront of safety science," Scanlon said.

The company has rivals in public markets that include U.K. multinational Intertek (UK:ITRK), Paris-based Bureau Veritas (FR:BVI), Geneva-based SGS (CH:SGSN) and Luxembourg-based Eurofins Scientific (FR:ERF).

Norges Bank Investment Management, which manages Norway's sovereign-wealth fund, agreed ahead of the deal to buy $75 million worth of shares.

But the parent company will control most of the voting rights, thanks to a dual-class structure of Class A shares and Class B shares, with the latter offering holders 10 votes per share, while the Class A shares carry one vote.

The Renaissance IPO exchange-traded fund IPO has gained 4.1% in the year to date, while the S&P 500 SPX has gained 7.4%.

Read also: Rubrik files for IPO as market continues to display signs of unfreezing

-Ciara Linnane

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04-15-24 0843ET

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