Freshpet Files for IPO as Spending on Natural Food for Pets Rises

NEW YORK (The Deal) -- Freshpet Inc., the Secaucus, N.J.-based maker of natural refrigerated pet food, filed for a $100 million initial public offering on Friday.

No terms were provided in the S-1 filing, with the size of the IPO as a likely placeholder.

Freshpet is going out to the public markets as demand for higher quality pet products increase, with consumers treating pets as though they were human members of their families.

Ingredients for the company's dog food include things like fresh chicken or turkey, peas or spinach, carrots, and brown rice, for example.

Selling shareholders are likely to include Freshpet's private equity backer MidOcean Partners LP, its distributor Tyson Foods (TSN) , and FreshPet Investors LLC, a shareholding entity managed by the company's chairman Charles Norris and Richard Kayne's PE firm Kayne Anderson Capital Advisors LP.

Co-founders Scott Morris and Cathal Walsh continue to hold stakes in the company, as well as executive roles, while John Phelps, another co-founder, is no longer involved with Freshpet.

Freshpet was founded in 2006, and began a partnership with Tyson Foods in 2009, which signed on to distribute its products.

For the fiscal year ended Dec. 31, Freshpet notched net loss of almost $22 million on revenue of about $63 million compared to a net loss of $19 million on nearly $44 million in revenue for the prior fiscal year. The company had negative Ebitda of nearly $7 million for the most recent fiscal year as compared to negative Ebitda of about $10 million for the prior period.

For the first half of 2014 ended June 30, Freshpet had a net loss of $11 million on revenue of almost $40 million, as compared to a net loss for the first half of 2013 of nearly $10 million with revenue at $29 million. Ebitda continued to improve in the first half, to roughly negative $2.6 million compared to almost negative $4.5 million for the same period a year prior.

Cash and cash equivalents as of June 30 were nearly $2 million, while long-term debt, notes payable and accrued fees and accrued interest on debt totaled roughly $95 million.

Adding to the company's costs was the opening of a new primary manufacturing facility in Bethlehem, Pa., at the end of 2013 and in buying refrigerators to place in retailers in which to place the company's product.

In the first half of 2014 Freshpet spent $7.6 million on refrigerators, compared to $6.6 million spent during the same period a year earlier. In 2013, the company spent $11 million on equipment for its new pet food plant.

Pet food companies in the natural space have been selling at around 2 times revenue. Natural Balance Pet Foods Inc., for example, with revenue of about $300 million sold in May 2013 for roughly $500 million to Big Heart Pet Brands Inc., then known as Del Monte Foods Co., sources previously said.

Premium pet food maker Blue Buffalo Co. is expected to IPO this year with an outside chance of a sale and is also likely to achieve a valuation of 2 times its $600 million to $800 million in revenue, sources have said.

Retailers in which Freshpet has installed its refrigerators include Wal-Mart Stores Inc., Whole Foods Market Inc., Target Corp., PetSmart Inc. and Kroger Co. Freshpet said it is now sold in over 12,500 locations, but also claims there is the opportunity to have its refrigerators installed in 35,000 locations across North America.

Goldman, Sachs & Co. and Credit Suisse Securities LLC are joint bookrunning managers for the offering, while Robert W. Baird & Co. Inc., Stifel, Nicolaus & Co. Inc., SunTrust Robinson Humphrey Inc. and Canaccord Genuity Inc. are also serving as underwriters.

Kirkland & Ellis LLP is providing legal advice to Freshpet, while Latham & Watkins LLP is serving as legal counsel to the underwriters.

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