Organic Pasta Maker Annie's Shares Soar In Debut
NEW YORK (AP) — Investors are gobbling up shares of pasta maker Annie's Inc., the latest sign of the pull of natural and organic foods for consumers.
Shares are up 83 percent to $34.75 in afternoon trading, putting Annie's on track to post the biggest opening day gain for an IPO this year. Shares of Proto Labs Inc., a Maple Plain, Minn.-based provider of custom parts, soared 81 percent in their first day of trading in late February.
Best known for its signature macaroni and cheese with pasta shaped like rabbits, Annie's makes more than 125 organic and natural food products and is sold in more than 25,000 store locations, almost all in the U.S.
The Berkeley, Calif., company, which started out in 1989 selling products to regional supermarkets and small natural food stores in New England, now derives 30 percent of its overall sales from big discount chains including Wal-Mart Stores Inc. and Target Corp.
"It is a brand name that everyone knows, and the natural organic food sector is pretty hot right now," said Tiffany Ng, a research analyst at IPO investment advisory firm Renaissance Capital.
The U.S. is the world's largest market for foods labeled organic and natural, with sales exceeding $40 billion in 2010, Annie's said in a filing with the Securities and Exchange Commission. The company said that it expects demand for such products to grow faster than demand for food overall.
Annie's has benefited from shoppers' interest in organic and natural foods in the U.S. Revenue rose 22.5 percent to $117.6 million in the year ended March 2011. For the nine months through Dec. 31, revenue rose 21 percent to $98.3 million.
The initial public offering raised $95 million, with 5 million shares pricing at $19 late Tuesday. That's above the range of $16 to $18 that the company expected on Monday. It originally planned to offer its share at $14 to $16. The higher price was a sign of strong demand for its shares.
Since about 80 percent of the shares were sold by company stockholders rather than Annie's, the company expects net proceeds from the IPO of just $11.6 million, after expenses. Proceeds from shareholder sales don't go to the company. Annie's plans to use some of the money to pay down debt.
The IPO market has heated up in 2012, with several technology companies making big splashes, after months of gains in the broader stock market. IPOs that have gone public this year are up about 20 percent, while the broader Standard & Poor's 500 index is up about 12 percent, said Ng.
Nine other companies were scheduled to go public this week. Two other companies making their IPO debut Wednesday — Regional Management Corp. and Vocera Communications — are also having a strong reception. Greenville, S.C.-based lender Regional Management's shares rose 12 percent, while mobile equipment provider Vocera, based in San Jose, Calif., jumped 41 percent.
Credit Suisse and JPMorgan managed the IPO for Annie's.