FORTUNE — Bright Horizons Family Solutions is planning to return to the public markets next week, via an initial public offering that could raise more than $200 million.
If it prices in the middle of its $19-$21 per share range, it would have an initial market cap of around $1.26 billion. For context, that’s just a hair below the $1.3 billion Bain Capital paid to take Bright Horizons private in May 2008. And Bain Capital is probably fine with it.
Here’s what I mean: Bain originally invested $640 million in cash to purchase Bright Horizons, which was actually a fairly high equity nut for the time. The remainder was bank debt that accrued onto the Bright Horizons balance sheet.
Were the company to go public at $20 per share, Bain’s stake would be valued at around $1.03 billion (nearly a 57% gain). Moreover, Bain has collected $2.5 million in annual management fees since the original buyout, and would be due another $7.5 million in management termination fees were the company to list. That works out to a bit over $18 million in fees, virtually none of which Bain actually has to share with its investors (under the terms of its old fund). Bright Horizons also has reimbursed Bain Capital nearly $100,000 in expenses associated with its investment.
So what happened? Basically, Bain loaded the company up with debt.
The 2008 buyout was at an enterprise value of $1.336 billion, of which $1.268 billion was implied equity value. But Bain used enough leverage to flip the scales a bit, meaning that Bright Horizons now would have virtually identical equity value but an enterprise value of $2.18 billion that includes another $922 million in debt. And just to complicate things a bit more, Bright Horizons plans to use some IPO proceeds to repay some senior notes — meaning the the post-IPO enterprise value should be around $2 billion with nearly $731 million in remaining debt.
In other words, Bright Horizons had a stronger balance sheet in May 2008 than it does today. Well, unless you’re an LBO apologist who insists that nearly $1 billion in new debt — and the accompanying interest payments — is actually a net positive (“they get added flexibility, blah, blah).
To be sure, Bright Horizons has increased its top-line numbers during Bain’s stewardship. For example, revenue was $973 million in 2011 compared to $774 million in 2007. And that’s the growth story Bain is hoping public market investors will buy and, in doing so, forgive the debt. If so, Bright Horizons could be one of the few multi-billion buyouts from early 2008 that produces a sizable return on investment. Just like Bain had bet it would be.
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