Dunkin’ Brands, owner of chain restaurant and variety donut-maker stores Dunkin Donuts, will reportedly file its IPO paperwork with the SEC in the very near future. The company was bought out by private equity group Bain Capital and others in 2006, which are now looking to take the firm public and will meet to set an IPO price range after the July 4th weekend.
PE groups continue to follow a trend of purchasing businesses under leveraged buyouts, reorganizing internally, then selling them back to public shareholders through IPOs after the dust is settled. Dunkin will look to raise close to $400 million through its sale of shares to public investors, trading under the ticker DNKN. The IPO will be led by banks JP Morgan (NYSE:JPM), Barclays (NYSE:BCS), and several others.
Bloomberg reports, “Dunkin’ follows private equity-backed companies such as HCA Holdings Inc. (NYSE:HCA) and Kinder Morgan Inc. (NYSE:KMI) in returning to the public market this year after leveraged buyouts. Private equity owners have completed the biggest U.S. IPOs in 2011 as a U.S. stock market near a three-year high increased investors’ demand for companies acquired through debt-fueled acquisitions before credit markets started to freeze four years ago.”
Renaissance Capital’s Kathleen Smith says, “Private equity IPOs this year have outperformed. That’s an encouraging sign for this IPO, and I do think investors have been awaiting it.” Successful IPOs from PE owned companies this year include HCA, up 9.2% from its IPO price, and Nielsen Holdings (NYSE:NLSN), up 33% from its public debut, compared to the average return on IPOs which is less than 4%.
Analysts believe that Dunkin’s activity over the last three year’s has positioned the company with a stronger competitive edge. Noting, “They’ve really expanded the brand over the past years. They have a much more broad menu.” In spite of internal changes that have boosted sales, Dunkin Brands is still stricken with debt, accounting for $1.8 billion in long-term expenses on corporate balance sheets. The company plans to use its IPO money to repay some of its outstanding loans, though may still struggle to regain profitability, having posted a net loss of $1.72 million in the first quarter this year.
Competitors to Watch: Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL), Panera Bread Company (NASDAQ:PNRA), Caribou Coffee Co., Inc. (NASDAQ:CBOU), Peet’s Coffee & Tea, Inc. (NASDAQ:PEET), McDonald’s Corporation (NYSE:MCD), Starbucks (NASDAQ:SBUX), Yum! Brands, Inc. (NYSE:YUM), and Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR).
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