IPO Market Gets Organic Fever

After Annie's and Natural Grocers, get ready for more deals

   

One of the surprising deals for 2012 is Annie’s (NYSE:BNNY), which is a top producer of organic foods. The IPO came to the market in late March at $19 a share, and it closed on Wednesday at $43.63.

But this isn’t a one-stock phenomena. Actually, it looks like the IPO market is poised for more organic deals.

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Take a look at Natural Grocers by Vitamin Cottage (NYSE:NGVC), which pulled off its IPO in late July. The offering price was $15, and it has since moved to $21.41.

Founded in 1955, Natural Grocers is a retailer for natural and organic foods. The company has extremely strict requirements for its foods. For example, they can’t contain artificial colors, flavors, preservatives, sweeteners, or partially hydrogenated or hydrogenated oils. The company also has a small-store format, which creates more efficiencies and strong returns on capital.

For over 40 consecutive quarters, Natural Grocers has posted positive comparable store growth. Last year the rate was 4.9%.

In fact, the growth potential is still in the early stages. Keep in mind that Natural Grocers is in only 11 states, such as Colorado, Kansas, Missouri, Oklahoma and Texas.

Future Deals?

Wall Street bankers are definitely putting together more transactions to feed investors’ hunger for organic plays. One recent filing is for Amira Nature Foods, which is a producer of packaged Indian Basmati rice.

The company sells its products in over 40 countries, but the bulk of its business is in India. Still, the market potential is enormous. The global sales for rice came to $240 billion in 2010.

From fiscal 2010 to 2012, Amira Nature Foods revenue went from $201.7 million to $329 million. The profit came to $11.9 million last year, and EBITDA was $40 million.

Another interesting deal for investors to keep an eye on is the proposed spin-off of Dean Foods‘ (NYSE:DF) WhiteWave division. It has brands like Silk, International Delight and Horizon Organic.

And yes, WhiteWave has been growing at a nice pace. From 2007 to 2011, revenues went from $1.2 billion to $2 billion. Net income was about $90 million last year.

The Opportunity

When it comes to investing in the organic sector, it has been tough for investors to find pure-play opportunities. For the most part, the main way to get exposure has been with retailers like Whole Foods Market (NASDAQ:WFM) and The Fresh Market (NASDAQ:TFM). But over the next year or so, this will likely change as the IPO market will probably see more and more deals.

As InvestorPlace contributor Will Ashworth recently noted, the good times for healthy-food stocks are likely to continue. After all, more and more consumers want to eat healthier. And they’re willing to pay premium prices. It’s certainly a nice formula for investors.

Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/ipo-market-gets-organic-fever/.

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