Domino's IPO price below target at $14
By Jim Irwin
Associated Press
DETROIT — Shares of Domino's Pizza Inc. were priced at $14 each yesterday, lower than the debt-laden chain hoped to fetch.
Domino's, the nation's No. 2 pizza chain, said in a previous filing with the Securities and Exchange Commission that it expected to get $15 to $17 a share for almost 24.1 million shares.
The shares will trade on the New York Stock Exchange beginning today under the symbol DPZ. According to the SEC filing, Domino's planned to sell 9.38 million shares which, at $14 a share, would raise $131.2 million. Stockholders in what until now was privately held Domino's sold 14.8 million shares, which includes about 150,000 shares that were added late yesterday.
Ann Arbor, Mich.-based Domino's said it would use its proceeds to pay down $125.5 million of its approximately $948 million in long-term debt; $10 million to its majority owner, Bain Capital Partners VI LLC of Boston; and $1.6 million in bonuses and stock options to two senior executives.
The selling stockholders include Bain Capital, which currently owns 65 percent of Domino's common shares; JPMP Capital LLC of New York, 7.9 percent; and founder Tom Monaghan, whose 3.5 million shares represent a 6.3-percent stake.
The SEC filing listed J.P. Morgan Securities Inc., Citigroup Global Markets Inc., Bear, Stearns & Co. Inc., Credit Suisse First Boston LLC and Lehman Brothers Inc. as underwriters for the offering.
The underwriters have an option to buy up to 3.61 million additional shares from certain selling stockholders to cover any over-allotments, Domino's said.
The IPO comes amid a recent rebound in the $32 billion-a-year U.S. pizza industry, said Steve Coomes, senior editor of pizza marketplace.com, an online trade publication.
Investors, however, probably won't find themselves rolling in dough, said David Menlow, president of IPOfinancial.com, an independent research firm in Milburn, N.J.
"Domino's Pizza is a name that people will just be able to put their head on the pillow at night and say, 'I'm OK with this stock,'" Menlow said. "As far as growth that is going to turn into a good investment, this will probably be along the lines of a utility stock that just moves very slowly on the upside."
Domino's in April announced plans to trade its stock publicly for the first time in the company's 44-year history.
There had been speculation that Domino's would go public since 1998, when Bain bought a 93-percent stake in the company from Monaghan for $1 billion. Bain and Monaghan would own 43.8 percent and 0.8 percent, respectively, after the IPO, according to the SEC filing.
Domino's reported net income of $39 million on sales of $1.33 billion in 2003, a 36 percent decline from net income of $60.5 million on sales of $1.28 billion in 2002. First-quarter 2004 net income was $18.4 million, nearly half of Domino's total for all of 2003.
Domino's had 7,473 franchised and company-owned stores as of March 31, up from 7,230 stores at the end of 2002.
Pizza Hut, the nation's biggest pizza chain, controls an estimated 19.5 percent of the pizza market, according to Technomic Inc., a Chicago-based restaurant industry consulting firm.
Pizza Hut is followed by Domino's, at 11.6 percent, and Papa John's, at 6.6 percent. Independents control about 48 percent of the pizza market.
