IPO Glory for Pinnacle Foods

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The maker of Vlasic Pickles, Celeste Frozen Pizza, Van de Kamp fish sticks and a variety of other frozen and packaged foods, Pinnacle Foods Inc. (NYSE: PF) priced its initial public offering (IPO) at $20 a share, the high end of its proposed $18 to $20 range.

Dairy products company WhiteWave Foods Co. (NYSE: WWAV) spun out of Dean Foods Inc. (NYSE: DF) last October in the most recent big food company IPO.

Food processors and packagers are not high-growth stocks, and investors in Pinnacle Foods likely are looking at its projected dividend yield of 3.8% as the enticement to buy into the company. WhiteWave does not yet pay a dividend, leaving investors to count on share price growth as the incentive to back the company.

WhiteWave’s shares priced at $17 for its IPO and closed last night at $17.02, after reaching a peak of around $19 at its launch. There is little reason to expect Pinnacle’s shares to perform a lot better, even with the expected dividend payment. The new company starts out with total debt of around $2.1 billion, not a lot in these days of low interest rates and lack of concern about debt loads.

Pinnacle will issue 29 million shares today and expects to raise $580 million. Prior to the IPO, funds affiliated with Blackstone Group L.P. (NYSE: BX) owned 95% of Pinnacle. If the underwriters exercise their options, Blackstone will own 68% of Pinnacle following the IPO, or 70.5% if the options are not exercised.

Shares opened at $22.16 this morning and are trading at $22.40, up 12%, in the first half hour of action.