Lynn Cowan of the Wall Street Journal covers the big story that Dunkin’ Brands Group Inc., operator of the seemingly ubiquitous Dunkin’ Donuts chain, is the latest private-equity-backed offering to arrange to go public in the U.S., with the coffee and doughnut restaurant chain registering for an IPO on Wednesday.
Dunkin’ Brands, which was acquired in 2006 by a group of private-equity firms, registered to sell up to $400 million in common stock in an initial public offering; that number is used solely to calculate filing fees, so the final amount it raises could vary significantly.
The company didn’t specify a price range, share size or date for its IPO, but most deals take about three months from filing to launch, so it is likely to go some time this summer. Dunkin’ which operates the Dunkin’ Donuts coffee shop chain as well as Baskin-Robbins ice cream shops, plans to list on the Nasdaq Stock Market under the symbol DNKN.
Dunkin’ Brands Group is seeking some serious dough. The owner of the Dunkin’ Donuts chain as well as Baskin-Robbins ice cream shops, today filed to go public. (Sorry for the terrible pun.)
Dunkin’ Deal: Five Things You Didn’t Know:
- Financials: It turns out doughnuts are a really good business. Dunkin’ Brands pulled down $577.1 million in revenue last year, about 7.3% higher than a year before. And the company’s total operating income for 2010 was $193.5 million. That gives Dunkin’ Brands a quite enviable operating profit margin of roughly 34%.
- How Dunkin’ Brands makes money: About 62% of the company’s revenue last year came from royalties and franchise fees paid by the business owners who buy the rights to open Dunkin’ Donuts and Baskin-Robbins stores. All stores are owned by franchisees. About 60% of Dunkin’s total sales are from coffee and other beverages. That’s quite a jolt.
- Feel surrounded by doughnut shops in New England? You’re right: From the IPO filing – “In our traditional core markets of New England and New York, we now have one Dunkin’ Donuts store for every 9,700 people. In the near term, we intend to focus our development on other existing markets east of the Mississippi River, where we currently, have only approximately one Dunkin’ Donuts store for every 48,400 people”
- Trouble with the tax man: Dunkin’ Brands disclosed that the IRS is currently auditing its federal income tax returns for 2006, 2007 and 2008. The company’s IPO filing said the IRS “has proposed adjustments for fiscal years 2006 and 2007 to increase our taxable income as it relates to our gift card program, specifically to record taxable income upon the activation of gift cards.” Dunkin’ Brands said it is fighting the IRS on this point.
- Look out China: Dunkin’ Brands has ambitious growth plans in both the U.S. and abroad. The lion’s shares of Dunkin’ Donuts’ and Baskin-Robbins’ collective 16,000 locations are in the U.S. For international expansion, Dunkin’ Donuts is eyeing China, Germany, Spain and Russia. Baskin-Robbins is shooting for expansion in China, Russia, Mexico, Australia and Indonesia. (Dunkin’ Donuts also coming to India, perhaps by early 2012.)
Bankers and market observers say more private-equity-backed IPOs like that of Dunkin’ Brands are likely to be filed this year, as the funds owning the stocks seek to exit positions they took years ago. In Dunkin’ Brands’ case, Bain Capital Partners, Carlyle Group and Thomas H. Lee Partners LP have owned the company for five years; they purchased it from liquor company Pernod Ricard SA for $2.43 billion.
Earlier this year, private-equity-backed hospitals operator HCA Inc. and energy company Kinder Morgan Inc. completed successful IPOs of more than $1 billion each. While the offering from Dunkin’ Brands isn’t likely to be as big as either of those deals, the company’s brand recognition is likely higher among investors, said Scott Rostan, a former investment banker and founder of Training the Street, a financial-services learning company that trains junior professionals at investment banks in accounting, valuation and financial modeling skills. Both Dunkin’ Donuts and the Baskin-Robbins brands date back to the 1940s.
“Dunkin’ is going to be a good bellwether on two fronts: one for private-equity backed companies seeking to go public, and also as further evidence of the strength and momentum of the IPO market this year,” Mr. Rostan said.
Read more at Wall Street Journal