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Private Equity News & Analysis

Dunkin raises $423m in IPO

The Carlyle Group, Thomas H. Lee Group and Bain Capital-backed restaurant franchise will use proceeds from the IPO to pay down debt accrued in part as a result of a dividend recapitalisation last year.

By
Sam Sutton
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Dunkin’ Brands has raised $423 million in an initial public offering backed by The Carlyle Group, Bain Capital Partners and the Thomas H. Lee Group, Reuters has reported. The private equity backed company was priced at $19 per share, above the previously reported $16 to $18 price range.

The private equity trio acquired the company in 2006 for $2.4 billion.

The company made 22,250,000 shares available on the NASDAQ Global Select Market on July 27, 2011 under the trading symbol “DNKN”. The shares were trading at $26.80 as of press time.

Dunkin' Donuts
“Given the market's willingness to pay up for restaurant stocks with strong unit growth potential – Chipotle Mexican Grill, Panera Bread, and Starbucks are currently trading at 48, 29, and 27 times our forward earnings estimates, respectively – we would not be surprised to see this stock trade above the high end of its expected offering range,” Morningstar analyst Joscelyn MacKay said in a report detailing the IPO. 

Dunkin’, which owns popular restaurant chains like Dunkin’ Donuts and Baskin-Robbins ice cream parlors, was acquired by the private equity firms in 2006 for $2.43 million. The company is expected to use proceeds from the IPO to pay down debt and expand its presence in the western US.

MacKay said $375 million in proceeds from the IPO will be used to pre-pay $475 million in senior notes taken out to distribute dividends to its private equity backers in 2010. An additional $100 million increase in the term loan will pay down the remaining debt.

Carlyle, Thomas H. Lee and Bain plan to divest their shares from a 32 percent stake to a 26 percent stake, Bloomberg has reported. 

JPMorgan, Barclays Capital, Morgan Stanley, Bank of America Merrill Lynch and Goldman Sachs are underwriting the deal.

IPOs have reemerged as a viable exit strategy in recent months. Kohlberg Kravis Roberts, Bain Capital, Bank of America’s private equity unit backed HCA’s $3.79 billion IPO in March, the largest recorded private equity backed offering ever.