Blue Buffalo Has a Hearty IPO
Blue Buffalo Pet Products set IPO price and shares surge on first day of trading.
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Blue Buffalo Pet Products (NASDAQ: BUFF) has filed an amended S-1 form with the U.S. Securities and Exchange Commission (SEC) for its initial public offering (IPO). The filing set the price at $20 just above the expected price range of $16 to $18 for 29.5 million shares, with an overallotment option for an additional 4.4 million shares. This would value the total offering at $678 million.
The underwriters for the offering are JPMorgan, Citigroup, Barclays, Deutsche Bank, Morgan Stanley, Wells Fargo and Loyal3 Securities.
Blue Buffalo considers itself the fastest growing major pet food company in the United States. The company sells dog food and cat food made with whole meats, fruits and vegetables, and other high-quality, natural ingredients.
BLUE is a billion dollar brand, based on sales at retail, and it is the number one brand in the wholesome natural market segment. Blue Buffalo currently has roughly 6% share of the overall pet food industry and feeds only 2% to 3% of the 164 million pets in the United States. The U.S. pet food market is valued at roughly $26 billion.
The company detailed in its filing:
As a result of this investment strategy, we did not turn profitable until 2010. Our net sales have grown from $190 million in 2010 to $918 million in 2014, which represents a compound annual growth rate, or CAGR, of 48%. During this period, our operating income grew from $15 million to $179 million, which represents a CAGR of 86%, while our net income grew from $23 million to $102 million, which represents a CAGR of 45%. Given the size and scale we have reached, we expect our growth rates to moderate in the future. We believe that only a few public U.S. CPG companies have our combination of scale, significant growth and strong margins.
Blue Buffalo will not receive any proceeds from this offering. Instead the selling shareholders will. The three largest selling shareholders in the offering are Invus, Christopher Bishop and The Bishop Family L.P.
Shares started trading Wednesday morning and were up 35% at $26.99 in the afternoon. The range on the day was $26.34 to $27.45, and over 20 million shares had moved on the day.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
