Vive le online shopping: Cnova sets terms for $355 million IPO

Cnova, a French and Brazilian e-commerce site spun out of retail giant Casino, announced terms for its IPO on Friday. The Bordeaux, France-based company plans to raise $355 million by offering 26.8 million shares at a price range of $12.50 to $14.00. At the midpoint of the proposed range, Cnova would command a market value of $5.8 billion. Its parent, Casino, is publicly traded on the Paris Stock Exchange ($9.3 billion market cap).

Business
Cnova was formed when Casino Guichard-Perrachon acquired Brazil's Nova Pontocom and consolidated its online retail subsidiaries. Cnova is the largest e-commerce company in France (50% of GMV) and the second largest e-commerce company in Brazil (50%) with a worldwide GMV of $5.3 billion for the 12 months ended September 30, 2014. It fulfilled 29 million orders during the same time, and orders during the first nine months grew 35% over the prior year period. Cnova is sensitive to foreign exchange rates; 2013 net revenue appeared 7% lower in its latest filing thanks to a stronger dollar.

Recent financials
Net sales increased 20% to $3.0 billion for the nine months ended September 30, 2014 (sales increased 27% excluding the impact of foreign exchange). This was due to a 26% growth in GMV over the prior year, driven by discounts, its expansion into tier 2 cities in Brazil, an increase in mobile phone sales and higher sales of consumer electronics. Its gross margin fell 115 bps to 13.4%, a result of discounts and free shipping offers as well as higher shipping costs in Brazil. Adjusted EBITDA rose 47% to $29 million because of operating leverage and a drop in marketing spend; Cnova notes its new strategy of lowering marketing and becoming the low-cost leader. The company's net loss of $68 million was driven down by $18 million in restructuring and IPO expenses, and $52 million in financial expenses related to factoring.

2014 e-commerce IPOs
Cnova is the third international e-commerce company with over $3 billion in annual sales to file for a US IPO, following JD.com in May (JD, up 26% from its IPO) and Alibaba in September (BABA; up 45%). The most recent e-commerce IPO, Wayfair (W), gained 30% on its first day but now trades 13% below its October 1 IPO price. 

Cnova, which was founded in 1998 and booked $4.2 billion in sales for the 12 months ended September 30, 2014, plans to list on the NASDAQ under the symbol CNV. Morgan Stanley, J.P. Morgan, BofA Merrill Lynch, Credit Suisse and Deutsche Bank are the joint bookrunners on the deal. It is expected to price during the week of November 17, 2014.