Dunkin' IPO gets warm response
Thursday, July 28, 2011
NEW YORK -- It's time to make the money.
Shares of Dunkin' Brands Group Inc. soared nearly 47 percent Wednesday, their first day of trading, feeding the demand of investors looking to trade in coffee and doughnuts.
Shares closed at $27.85, up $8.85 from the $19 price that Dunkin' Brands set Tuesday night. Dunkin' sold about $423 million worth of shares at $19 apiece.
Most stocks get a one-time pop on their first trading day. Still, Dunkin' Brand's reception indicates that investors are willing to shell out for initial public offerings -- and not just for the tech companies like LinkedIn and Groupon.
Dunkin' Brands, which owns Dunkin' Donuts and the Baskin-Robbins ice cream chain, has said it will use the money from the public offering to pay down debt, in part so that it will be able expand overseas.
Dunkin' Brands could raise a bit more if the banks underwriting the IPO decide to buy more shares in the next 30 days.
Dunkin's public offering comes at a time when restaurants are struggling as Americans are cutting back on eating out. But analysts predict that breakfast and snacks -- the main fare of Dunkin' Donuts -- will continue to grow over the next decade.
In 2010, Dunkin' Brands' revenue grew 7 percent, partly because of new locations but also because more customers are buying more things per visit. Net income, however, fell 23 percent as expenses rose, including fees paid to the investment firms that own it, costs for refinancing debt, spending on technology, and reserves set aside for potential legal costs.
A weak spot could be U.S. sales of Baskin-Robbins ice cream, which fell 5.5 percent last year. Also, Dunkin' Brands lost money in the first quarter of this year, as it paid more in interest payments, administrative expenses and the cost of ice cream.
Dunkin' has made changes since a trio of private-equity firms---- Bain Capital Partners, Thomas H. Lee Partners of Boston, and Carlyle Group -- bought the company in 2005 for $2.4 billion.
The firms brought in a technology head, added egg-white sandwiches to the menu to try to appeal to the health-conscious and began selling its beans in grocery stores. The firms will continue to own as much as 78 percent of the public company and will control two-thirds of the board, making it nearly impossible for other shareholders to successfully dissent.
Dunkin' Brand's reception on Wall Street is another indication that public offerings are gaining steam after the financial crisis scared off companies from trying to go public. So far this year, 87 IPOs have been priced, 23 percent more than at this time a year ago, according to Renaissance Capital.
So far, they have so far returned an average of 13 percent to investors, Renaissance Capital said. Among the best performers was the much-buzzed about LinkedIn, which is above $102 after opening at $45. Kips Bay Medical was among the worst, down to $2.78.