Cold-storage company that moved to Michigan from California just did 2024's biggest IPO
A Novi-based cold storage company that relocated from California seven years ago just completed the biggest initial public offering on the stock market so far this year.
Lineage is a real estate investment trust, or REIT, that operates temperature-controlled warehouses for storing food in the U.S. and some worldwide markets. It says it posesses the largest network of such warehouses in the world, based on capacity.
The company announced that it sold nearly 57 million shares at $78 a piece, raising about $4.4 billion in its IPO Thursday on the Nasdaq exchange. Lineage initially set out to raise between $3.4-$3.9 billion. The stock closed up $2.78 to $80.78.
"We went out with what was going to be the largest IPO of the year (and) we upsized it the max the SEC would allow," Lineage CEO Greg Lehmkuhl said in a phone interview Thursday afternoon. "We decided to take a lot more money because it lowers our debt and allows us more dry powder to continue to grow."
Lineage owns or leases a sprawling network of 482 warehouses, comprising more than 84 million square feet, according to its Securities and Exchange Commission filings. The warehouses are generally used for storing frozen and perishable foods for what the company says are some of the largest food retailers, manufacturers, processors and distributors.
Lineage says it has over 26,000 employees in 19 countries. The head count in Michigan is about 400, between the company's headquarters on Humboldt Drive in Novi and its four warehouses in Hart, Hartford, St. Joseph and just outside Benton Harbor.
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The company's structure as a REIT allows shareholders to deduct some of the taxes owed on their dividends, according to Reuters.
Lineage was started in 2008 by two former Morgan Stanley investment banking analysts, Adam Forste and Kevin Marchetti, who were living in California and bought their first cold-storage warehouse in Seattle.
The company went on to grow primarily through 116 acquisitions of warehouses, with most of those purchases occurring in the past four years, according to SEC filings. Lineage also has been building some new warehouses.
Lineage moved its headquarters to Novi from Irvine, California, in 2017, receiving financial assistance from a local tax abatement and a $850,000 performance-based grant from the Michigan Strategic Fund.
Lehmkuhl, who joined the company in 2015 after years at Ann Arbor-based trucking firm Con-way, recalled how Lineage's executive leadership team at the time was spread out across the country, although five of the 10 members happened to be in Michigan, which became a factor in the decision to move here.
Additionally, he said, company leaders liked Michigan's central geographic location, the range of flight connections at Detroit Metropolitan Airport, the availability of talent in Michigan because of the auto industry and the affordability of that talent compared with Orange County, California.
"So we did an analysis on where to be and why — and it just so happened it ended up 5 miles from my house," Lehmkuhl said.
The company's SEC filings describe significant consolidation and investor interest in the temperature-controlled warehouse business in general in recent years. Even so, Lehmkuhl said Lineage is still about twice the size of its next biggest competitor.
Of the 482 Lineage warehouses, 312 are in North America, 88 in the Asia-Pacific region and 82 in Europe.
The contents inside its warehouses is "pretty much all food," he said.
“I think one thing that people don’t understand is tons of the foods they eat was frozen before it got to the grocery store or the restaurant," he added. "Your fresh sushi was frozen, your bread was frozen — so many things were temperature-controlled, at least at one point in its journey from production to the consumer.”
One key to the company's success and growth was an effort by the cofounders to make personal connections throughout the industry over the years, according to Lehmkuhl.
"They befriended themselves to the industry early on and got to know the families that own the cold storage industry," he said. "It was, and in large part still is, kind of a cottage industry — family-owned — and they dug their heels in and they moved into the warehouses that they bought and learned the business from the ground up, while getting to know all of these family owners through our industry association and really gained trust with these people.
"Then they talked to people about, ‘Hey, whenever you sell your business, we’d like to be the buyer.' And kind of, one at a time, gained the trust of the organization that they could be a good home for these families’ businesses.”
Lineage reported having a net loss of $96 million last year on $5.3 billion in total revenue. The company says in SEC filings that it plans to use the IPO proceeds to help pay down its substantial $9.3 billion debt load — built up from the many acquisitions — as well as general corporate purposes and one-time cash grants to certain employees.
The IPO was structured in a way that maintained the co-founders' majority control of the company.
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Contact JC Reindl: 313-378-5460 or jcreindl@freepress.com. Follow him on X @jcreindl.
This article originally appeared on Detroit Free Press: Firm that moved to Mich. from California just did year's biggest IPO
