Dunkin’ Brands has priced its IPO at $19 per share, raising $422.75 million. The price is above a previously set range of $16 to $18 per share, and gives the Canton, Massachusetts-based company a market value of more than $2.4 billion, Reuters reported. Dunkin’ Brands begin trading today on the Nasdaq. The company is currently owned by private equity investors Bain Capital Partners, the Carlyle Group and Thomas H. Lee Partners.
(Reuters) – Dunkin’ Brands (DNKN.O) has raised $422.75 million after pricing its IPO at $19 per share, well above the range set by underwriters, signalling strong demand for this week’s biggest deal.
The IPO, priced above a previously set $16 to $18 range, gives the parent of the Dunkin’ Donuts and Baskin-Robbins chains a market value of just over $2.4 billion — less than a 10th of Starbucks’ (SBUX.O).
The Canton, Massachusetts-based company plans to use proceeds from the IPO to repay debt and to help double the number of Dunkin’ Donuts outlets in the United States over the coming 20 years.
It sold 22.25 million shares, as expected, in the offering. JPMorgan (JPM.N), Barclays Capital (BARC.L), Morgan Stanley (MS.N), Bank of America Merrill Lynch (BAC.N) and Goldman Sachs (GS.N) are lead underwriters on the deal. Dunkin’ Brands shares begin trading Wednesday on the Nasdaq under the ticker “DNKN.”
Dunkin’ Donuts sells coffee, doughnuts and food and has a devoted following in the eastern United States, where almost 6,700 of its roughly 6,800 domestic outlets are located. The chain also has more than 3,000 international stores.
It plans to focus its growth on markets east of the Mississippi River, including Philadelphia, Chicago and South Florida. Longer term, it sees the western United States as a significant opportunity. Dunkin’ Donuts has just about 100 stores in the region now.
Josef Schuster, founder of Chicago-based IPO investment firm IPOX Schuster LLC, said institutional investors are hungry to invest in popular restaurant companies with growth potential.
“Dunkin’ Donuts doesn’t have much coverage in the West, there seems to be a lot of potential to expand in that area,” said Schuster, an investor in the deal.
Baskin-Robbins, an ice cream chain, is the company’s more global brand, with just over 2,500 of its nearly 6,500 worldwide stores in the United States.
Based on its $19 share price, Dunkin’ Brands shares would trade at 4.2 times 2010 sales, a richer valuation than Starbucks, which at the stock market close on Tuesday traded at 2.8 times fiscal 2010 sales.
While Starbucks has built a global brand selling fancy coffee drinks to relatively upscale consumers, Dunkin’ Donuts takes pride in its more working-class clientele — a group also targeted by McDonald’s Corp’s (MCD.N) McCafe coffee expansion.
Starbucks already has more than 11,000 of its 17,000 global cafes in the United States. As a result, its expansion is focused mainly on overseas markets like China.
McDonald’s, which has 14,000 restaurants in the United States, also is building international eateries.
Where it lags Starbucks and McDonald’s in store numbers, Dunkin’ Donuts wins when it comes to customer loyalty.
Brand Keys Inc, a consumer and brand loyalty consulting firm, says Dunkin’ Donuts has ranked No. 1 for customer loyalty and engagement in coffee over the past five years.
Starbucks currently ranks second, McDonald’s is third and Canadian chain Tim Hortons Inc (THI.TO) is fourth, the firm said.
Private equity firms Bain Capital, Carlyle Group [CYL.UL] Group and Thomas H. Lee Partners bought Dunkin’ Brands from global spirits company Pernod Ricard SA (PERP.PA) for $2.4 billion in 2006.
Those firms sold shares in the IPO, reducing their overall stake from 32 percent to 26 percent. (Reporting by Lisa Baertlein; Editing by Richard Chang, Bernard Orr and Lisa Shumaker)