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Pinnacle Foods Cooks Up an IPO

Company is the only offering on the menu this week


Last week was an action-packed one for IPOs. And except for a couple clunkers, the returns were fairly strong. Take a look at the returns from the original offering price:

Company Ticker Return
Five Oaks OAKS -3.3%
Marin Software MRIN 10.5%
West Corp. WSTC -7.5%
Aviv REIT AVIV 14.9%
Enanta Pharmaceuticals ENTA 20.4%
Model N MODN 24.7%
Tetraphase Pharmaceutical TTPH 0.1%

In all, the average return has been around 8.5%.

This week, though, things will be a bit slower. In fact, there is only one deal on the calendar: Pinnacle Foods (NYSE:PF).

The company is a manufacturer and distributor of food items like Duncan Hines, Vlasic, Mrs. Butterworth’s and Log Cabin Syrup. Many of the brands are ranked No. 1 or No. 2 in market share positions in North America, while about 85% of U.S. households has some type of product from Pinnacle.

The company isn’t just resting on its laurels, though. Instead, it’s been busy growing via acquisitions. In late 2009, Pinnacle acquired Birds Eye Foods, which turned it into the fifth largest frozen food manufacturer in the U.S. Plus, it has expanded its portfolio into healthy, high-quality items, which tend to have higher margins.

On top of that, PF continues to invest in creating new products as well. It has a state-of-the-art research and development lab, which has led to some innovative offerings like Duncan Hines Frosting Creations (a custom-flavor frosting system), Vlasic Farmer’s Garden (artisan-quality pickles) and Birds Eye Voila! (family-size bagged meals). The renewal rate, which is the gross sales from products launched within the last three years, has doubled to 9.4% since 2009.

The company’s financials also reflect such sucess. From fiscal 2008 through fiscal 2012, PF grew its revenues by 59% to $2.5 billon and adjusted EBITDA climbed 91% to $426.1 million. With its strong cash flows, PF has been able to pay down $350 million of its debt, which is now at $2.6 billion. Keep in mind that, back in 2007, the Blackstone Group (NYSE:BX) took the company private in a $2.16 billion deal

As for the IPO, PF plans to issue 29 million shares at a range of $18 to $20. The lead underwriters include Barclays (NYSE:BCS), BofA Merrill Lynch (NYSE:BAC), Credit Suisse (NYSE:CS), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and UBS (NYSE:UBS)

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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