Dunkin' Donuts IPO Bound: Reports

CANTON, Mass. ( TheStreet) -- Dunkin' Donuts owner Dunkin' Brands is reportedly considering a $500 million initial public offering.

Six years after a consortium of private equity firms including Bain Capital Partners, The Carlyle Group and Thomas H. Lee Partners purchased Dunkin' for $2.4 billion, the donut and ice cream chain is now looking to trade publicly, according to unnamed sources familiar with the situation cited by Reuters.


According to the report, the IPO could grow as large as $750 million, though the newswire's sources disagreed about Dunkin's valuation. They did agree that talk of an IPO remains in preliminary stages and that plans could change.

"We do not respond to rumors or speculation. We are focused on operating our business and helping our franchisees drive revenues and profits at their restaurants," Dunkin' Brands said in a statement.

Dunkin' Brands operates Dunkin' Donuts coffee and donut stores, as well as Baskin-Robbins ice cream shops.

Dunkin' opened 574 net new locations around the world in 2010, generating system-wide global sales of $7.7 billion, up more than 20% year-over-year from global sales of $6.4 billion in 2009.

"Private equity firms have their own shareholders, and the fundholders are screaming for profits. So it becomes a financial imperative for these firms to try and monetize these investments by bringing them public,'' David Menlow, founder of research company IPOfinancial.com, told Boston.com, referring to recent news of a potential IPO for Zipcar.

"Dunkin's name is going to have quite a bit of attraction," Menlow said. "It's obviously very ubiquitous. But it's going to come down to how much debt this company has and what their ability will be to service it and pay it down.''

Jim Coen, president of Dunkin' Donuts Independent Franchise Owners, told the Web site he hopes funds raised through an IPO "will go back into the brand,'' adding that "going public will add transparency. But it will also drive the need for quarterly growth. And that's a concern to franchise owners who have been growing their businesses for over 50 years.''

Crumbs, the New York City-based cupcake bakery and retail chain is also mulling an IPO, according to reports earlier this year.


The deal to take Crumbs public through a merger with special-purpose acquisition firm 57th Street General Acquisition values the cupcake chain at $66 million.

A publicly traded Crumbs "will be a growth play" for investors, Michael A. Yoshikami, president and chief investment strategist at YCMNET Advisors, told TheStreet in January. He expects investor interest to be strong since Crumbs would represent one of the only ways to bet on the cupcake trend through an exchange-traded equity.

Krispy Kreme Doughnuts ( KKD), competitor to Dunkin' Donuts and Crumbs, saw its shares plunge more than 20% on Friday after the company disappointed investors with a quarterly loss as rising commodity costs ate into its bottom line, and said it would raise prices.

If customers are willing to pay those prices and costs are managed effectively, the company expects to earn between $22 million and $24 million in fiscal 2012, higher than the $21 million analysts were expecting.

Krispy Kreme

Krispy Kreme booked a fourth-quarter loss of $1.5 million, or 2 cents per share, compared with a year-earlier profit of $500,000, or a penny per share. Revenue rose 6% to $91.7 million.

Both top- and bottom-line results missed expectations. Analysts' consensus had been for Krispy Kreme to earn 4 cents per share on revenue of $92.6 million.

A number of food companies have recently reported that higher ingredient and commodity costs have pressured their results in recent quarters as global food prices continue to rise.

Companies including Hershey ( HSY), J.M. Smucker ( SJM), Panera Bread ( PNRA), McCormick ( MKC), ConAgra Foods ( CAG), Kellogg ( K) and Sara Lee ( SLE) have all said their financial results were impacted by higher commodity costs on everything from wheat and sugar to coffee beans and fuel, and implemented price increases to help offset those costs.

-- Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here: Miriam Reimer.

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