Dunkin’ Brands Group, the operator of Dunkin’ Donuts coffee shops, surged during the first day of trading after its $422.8 million IPO.
The shares rose $8.85, or 47%, to close at $27.85 in Nasdaq composite trading.
The stock was priced higher than the top end of the marketed range, with 22.3 million shares selling at $19 each Tuesday after being offered for $16 to $18, Dunkin’ said in a statement.
The doughnut seller, with 6,800 U.S. locations, enticed investors with plans to more than double its U.S. store count in 20 years after outpacing McDonald’s Corp.’s revenue growth last year. Recently, the chain has sought to draw customers in the afternoon with snack foods including pepperoni-stuffed breadsticks.
Dunkin’ planned to use proceeds from the IPO to repay debt accumulated under the ownership of private equity firms Bain Capital, Carlyle Group and Thomas H. Lee Partners, according to its regulatory filing. The firms paid about $2.43 billion for the company in a 2006 leveraged buyout.
In a letter to investors at the end of March, Carlyle marked its investment at 1.55 times what it bought the stake for, putting the enterprise value of the company at $3.5 billion, including $1.8 billion in long-term debt. All three firms planned to sell shares in the IPO, each cutting their stake to 26% from about 32%, according to the prospectus.
The biggest U.S. IPOs this year have been brought by private equity firms. HCA Holdings Inc., the hospital chain partly owned by KKR & Co. and Bain, raised $4.4 billion in March in the biggest-ever private equity-backed IPO, according to Preqin. Kinder Morgan Inc., the energy-pipeline company whose owners include Carlyle, raised $3.3 billion in its February IPO.
At the IPO price, Dunkin’s market capitalization is about $2.4 billion. Completion of the IPO would leave the company with about $1.48 billion of long-term net debt and $56.6 million of cash, according to the IPO prospectus, giving it an enterprise value of about $3.82 billion. That’s about 57% higher than the private equity firms paid when they bought Dunkin’ from Pernod Ricard SA.