The Deal: Sprouts IPO Raises $333M, Shares Pop

NEW YORK ( The Deal) -- Private equity-backed Sprouts Farmers Market ( SFM) on Thursday priced its 18.5 million-share initial public offering at $18 a share, above the expected $14 to $16 range, raising $333 million.

The stock continued to ascend during the day, closing at $40.11, up 14.6% from the opening trade and 122.8% above the initial pricing.

Phoenix-based Sprouts is a specialty retailer of natural and organic foods, operating 163 stores in eight states. Of the 19 openings planned for 2013, 15 have been completed, and about 20 are planned for 2014, the company said in its prospectus.

For the 13 weeks ended March 31, net income was $ 18.1 million, on net sales of almost $400 million, up from net income of $9.5 million for the same period the year before, on $375.7 million in sales.

Sprouts' private equity backers, Apollo Global Management ( APO) and San Diego-based Silver Canyon Group, did not sell their stakes in the IPO.

With the dilutive effects of the offering, Apollo's stake went from 51.8% to 45.4%, while Silver Canyon's stake, which it holds via its KMCP Grocery Investors LLC vehicle, went from 7% to 6.2%.

At the IPO price, Apollo's stake of about 65.2 million shares is worth about $1.17 billion. That, added to the $262.2 million dividend the private equity company took out in April, means Apollo thus far has made an unrealized return of about 6.8 times its original $210 million equity investment in February 2011.

Silver Canyon's stake of 8.8 million shares in Sprouts is worth $159.1 million at the IPO price.

That, added to the $55 million Sprouts paid to acquire Sunflower and the $19.7 million April dividend, brings the firm's unrealized gain to about 7.8 times the $30 million investment the firm made when it acquired Sunflower in December 2007.

Sprouts itself sold about 17.7 million shares in its IPO, while shareholders unloaded nearly 800,000 shares.

Credit Suisse, Goldman Sachs, ( GS) and Bank of America Merrill Lynch ( BAC) acted as joint bookrunners on the deal.

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