IPO Report: Freshpet (FRPT)

Francis Gaskins |

As of June 30, 2014, Freshpet (FRPT) Fridges were located in over 12,500 stores, and FRPT believes there is an opportunity to install a Freshpet Fridge in at least 35,000 stores across North America. It is based in Seacaucus, NJ.

Ten other companies are scheduled to IPO for the week of Nov. 3, 2014. The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Joint-managers: Goldman Sachs, Credit Suisse
Co-managers: Baird, Stifel, SunTrust Robinson Humphrey, Canaccord Genuity

End of lockup (180 days): Wednesday, May 6, 2015
End of 25-day quiet period: Tuesday, December 2, 2014

FRPT scheduled a $135 million IPO with a market capitalization of $413 million at a price range midpoint of $13 for Friday, Nov. 7, 2014 on Nasdaq.

Freshpet IPO Summary

As of June 30, 2014, Freshpet Fridges were located in over 12,500 stores, and FRPT believes there is an opportunity to install a Freshpet Fridge in at least 35,000 stores across North America.

Valuation
Glossary

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Valuation Ratios

       

Freshpet (FRPT)

$416

5.2

-27.0

6.3

6.3

32%

             

FRPT Conclusion

Neutral plus

Sept rev +56% based on acquisition

Distribution in 13,000 stores, most of the majors

Market potential of 35,000 stores

June 6 mos P/E of -27 adjusted loss

Business

FRPT started Freshpet with a single-minded mission—to bring the power of real, fresh food to its dogs and cats. FRPT was inspired by the rapidly growing view among pet owners that their dogs and cats are a part of their family, leading them to demand healthier pet food choices.

Over the last eight years, FRPT has created a comprehensive business model to deliver wholesome pet food that “pet parents” can trust, and in the process FRPT believes it has become one of the fastest growing pet food companies in North America. FRPT’s business model is difficult for others to replicate and FRPT sees significant opportunity for future growth by leveraging the unique elements of its business:

FRPT’s Brand

FRPT founded the fresh, refrigerated pet food category in North America and its brand transparently communicates its passion and dedication.

FRPT’s Product Know-How

FRPT’s fresh, refrigerated products are differentiated inside and out from conventional pet food as a result of its proprietary recipes, cooking techniques and packaging developed over the last eight years.

FRPT’s Freshpet Kitchens

All of FRPT’s food is made in the United States, and FRPT owns and operates what it believes is North America’s only fresh, refrigerated pet food manufacturing facility, which FRPT calls the Freshpet Kitchens, located in Bethlehem, Pennsylvania.

FRPT’s Refrigerated Distribution

FRPT is the only pet food company with an established refrigerated supply chain connecting its Freshpet Kitchens to retail stores across North America.

FRPT’s Freshpet Fridge

FRPT sells its products through a fast-growing network of company-owned branded refrigerators, known as Freshpet Fridges, installed in over 12,500 retail stores across North America.

FRPT’s Culture

FRPT fosters a culture of innovation, and it strives to be open, honest and socially responsible in everything FRPT does.

Freshpet is disrupting the $22.5 billion North American pet food industry by driving consumers to reassess conventional dog and cat food offerings that have remained essentially unchanged for decades.

FRPT positions its brand to benefit from mainstream trends of growing pet humanization and consumer focus on health and wellness. FRPT prices its products to be accessible to the average consumer, providing it with broad demographic appeal and allowing it to penetrate multiple classes of retail including grocery, mass, club, pet specialty and natural.

FRPT has successfully expanded its network of Freshpet Fridges within leading blue-chip retail chains including Albertsons, BJ’s, Kroger, Petco, PetSmart, Publix, Safeway, Target, Wal-Mart and Whole Foods.

The strength of FRPT’s business model extends to its customers, who FRPT believes find that Freshpet grows their pet category sales, drives higher traffic, increases shopper frequency and delivers category leading margins.

As of June 30, 2014, Freshpet Fridges were located in over 12,500 stores, and FRPT believes there is an opportunity to install a Freshpet Fridge in at least 35,000 stores across North America.

Intellectual Property

FRPT owns a number of trademarks and service marks that have been registered, or for which applications are pending, with the United States Patent and Trademark Office including, among others, Freshpet, Vital, Nature’s Fresh, Roasted Meals, Freshpet Dog Joy Treats and Dognation.

Competition

FRPT competes with manufacturers of conventional pet food such as Mars, Nestlé and Big Heart Pet Brands.

FRPT also competes with specialty and natural pet food manufacturers such as Colgate-Palmolive, Blue Buffalo and Merrick. In addition, FRPT competes with many regional niche brands in individual geographic markets.

5% Shareholders pre-IPO

MidOcean         40.4%

Freshpet Investors LLC 29.4%

Charles A. Norris    30%

Dividends

No dividends are planned.

Use of Proceeds

FRPT expects to receive $126 million from its IPO and use it for the following:

to repay its Existing Indebtedness and accrued interest and to effect the Preferred B Stock Redemption;

 to pay fees and expenses related to this offering and the Debt Refinancing; and

 to support its growth, primarily through installing new Freshpet Fridges and adding manufacturing capacity, and for working capital and general corporate purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FRPT Freshpet Inc. 9.10 0.00 0.00 121,270

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