Blue Buffalo Pet Products, the largest maker of all natural dog and cat food, announced terms for its IPO on Wednesday.
The Wilton, CT-based company plans to raise $501 million by offering 29.5 million shares (100% insider) at a price range of $16 to $18. At the midpoint of the proposed range, Blue Buffalo would command a fully diluted market value of $3.3 billion.
5% of shares will be offered to employees, customers and individual investors through the LOYAL3 platform.
Blue Buffalo Business
Named after the founding family's dog Blue, Blue Buffalo is the market leader in the "wholesome natural" segment of retail pet food. Total US retail pet food sales were $26 billion in 2014, and wholesome natural has grown from 11% of pet food retail sales in 2011 to 17% in 2014. Meanwhile, Blue Buffalo has increased its share of the segment from 23% in 2011 to 34% in 2014. Overall, the company has a 6% market share of retail pet sales and feeds about 2-3% of the 164 million pets in the US. About 97% of the company's sales are US-based and 3% are international, which represents a $49 billion total pet food market.
Competition
With a 6% market share, Blue Buffalo primarily competes with well-established pet food brands from Nestlé (33%), Mars (20%), J.M. Smucker (12%) and Colgate-Palmolive (7%), as well as private label brands (8%). Some of these larger players recently began offering pet food in the wholesome natural segment. In March 2015, Smucker acquired its portfolio of pet food from Del Monte for about $6 billion including debt. In April 2014, Mars enhanced its own portfolio by purchasing 80% of Procter & Gamble's pet food business for $2.9 billion. November 2014 IPO Freshpet (FRPT), which makes refrigerated pet food, raised over $150 million at a valuation close to $500 million. It gained 27% on the day of its offering but now trades 13% above its offer price. The company issued a press release on July 8 that it would be introducing a wholesome natural dry pet food.
Blue's owners
All shareholders are selling 15% of their shares. Blue Buffalo is controlled by private equity group Invus (62% post-IPO stake), which first invested in 2006. Other shareholders include founding members/executives from the Bishop family (11%), Ronald Edwards (3%) and Leonard Green (3%).
Blue Buffalo Pet Products, which was founded in 2002 and booked $940 million in sales for the 12 months ended March 31, 2015, plans to list on the NASDAQ under the symbol BUFF. J.P. Morgan, Citi, Barclays, Deutsche Bank and Morgan Stanley are the joint bookrunners on the deal. It is expected to price during the week of July 20, 2015.
