Re/Max IPO Rests on Improving U.S. Housing Market

24/7 Wall St.

Re/Max Holdings Inc. has filed a Form S-1 with the U.S. Securities and Exchange Commission (SEC) for an initial public offering (IPO) to raise up to $100 million. The operator of franchised real estate brokerage firms claims more than 90,000 agents in more than 6,300 offices in 95 countries.

In the filing Re/Max said it is “well-positioned to benefit from an increase in our agent count as a result of the current U.S. economic recovery and the rebound in the U.S. housing sector which appears to be gaining momentum.” Re/Max generated nearly 60% of its 2012 revenues from franchise fees and annual dues, and another 14% of revenues comes from transaction fees generated by its agents.

Re/Max said it plans to use about $27.3 million of net proceeds from the IPO to require franchise rights in the Southwest and Central Atlantic regions. The remainder of the proceeds will be used to purchase common units in a holding company, RMCO LLC, which will be Re/Max’s sole asset.

Whether now is a good time for this IPO is arguable. Competitor Realogy Holdings Corp. (RLGY) came public in October of last year and its stock, though up nearly 25% since then, has dropped from a peak of around $55 a share in mid-May to around $43 a share.

The rise in mortgage loan rates has cast something of a pall over the housing market recently. Even though mortgage lending rates remain historically low, the very quick pace of the increase has slowed home buying interest for the moment. Existing home inventory is still very low and new home inventories are just beginning to show up. The market continues to recover and, provided interest rates do not rise too sharply, that recovery should continue into next year.

Re/Max did not indicate how many shares it would offer in its IPO. The underwriters for the offering are Morgan Stanley, BofA/Merrill Lynch and J.P. Morgan. Re/Max shares will trade on the New York Stock Exchange under the ticker symbol RMAX.

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