Pet food brand looks to collar the market

February 25, 2014 12:22 am

Pet food brand looks to collar the market

By Ed Hammond in New York

Blue Buffalo, the premium dog food business, is grooming itself for an initial public offering, according to people familiar with the matter.

The company, which has a sideline in cat food products, has been talking to possible bookrunners for a stock market listing, these people said, but had not yet selected banks.

An expected valuation for the IPO could not be obtained, but people familiar with the process said Blue Buffalo was targeting a multiple of over 20 times earnings. Standard & Poor’s has forecast revenues of about $600m for 2013.

The move, which would mark an exit for Blue Buffalo’s private equity backer Invus Group, comes at a buoyant time for US equity markets and would be the latest in a string of IPOs to hit the market this year. No deal is definite and discussions are still at an early stage, however.

The pet food business has attracted some of the biggest names in the consumer products business, including Mars, Nestlé and Procter & Gamble, but it is unclear whether a sale is also being explored.

Blue Buffalo was founded by William Bishop in 2003 as a pet food company using natural ingredients and sells a variety of brands, including its Rocky Mountain and Wilderness recipes, which retail for between $45 and $70 a bag.

The Connecticut-based company sells a selection of high-end canine stews under the strap line: “Love them like family. Feed them like family”. The company also sells gluten-free dog food in its Blue Freedom line.

In 2012, the company took on a $399m loan to finance a dividend. That debt matures in 2019.

Consumer goods companies have not enjoyed the run in the public markets that some sectors have recently. However, Pets at Home, the UK pet products retailer owned by KKR, this month launched a listing that could value it at about £1.5bn including debt.

Technology companies have lined up for stock market debuts during the past six months, with financial analytics businesses Markit and Virtu also both expected to list within the next few months.

There are 83.3m dogs in the US and the country’s pet food market was worth an estimated $21.26bn in 2013, according to the American Pet Products Association. Spending on pet food has increased steadily through the financial crisis, in contrast to the trend experienced across the wider consumer goods sector.

Blue Buffalo could not be reached for comment. Invus declined to comment.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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