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Bojangles stock rises following IPO

Bojangles stock rises following IPO

Quick-service chicken operator raises more than $147 million in its offering

Bojangles Inc. stock rose 40 percent after its initial public offering Friday morning, as investors continue to put money into what they see as high-growth restaurant companies.

The Charlotte, N.C.-based quick-service operator raised more than $147 million in its offering, after selling nearly 7.8 million shares at $19 a share, the high end of its expected range. The stock immediately increased to nearly $28 a share, more than a 40-percent increase, before easing to $25 a share, or about a 31-percent increase, by noon.

The amount raised will increase to nearly $170 million if underwriters exercise their option to buy an additional 1.2 million shares. The company’s owner, Advent International, will receive most of the proceeds from the offering.

At $19 a share, Bojangles will have a market cap of more than $700 million if underwriters exercise their option to buy more shares.

Bojangles CEO Clifton Rutledge told Nation’s Restaurant News Friday that the company received considerable interest during presentations before the offering.

“The road show was great,” Rutledge said. “Everywhere we went was to places that do not have Bojangles’. To see that demand speaks to the power of this brand.”

Bojangles is the latest in a string of restaurant companies to go public, as investors in consumer stocks look for growth, giving operators strong valuations on their IPOs. Bojangles is the second restaurant company to go public this year, following the January debut of Shake Shack Inc.

Two other restaurant companies, the Brazilian steak operator Fogo de Chao Inc. and the chicken wing concept Wingstop Inc., have also filed documents for IPOs. Del Taco Holdings Inc., meanwhile, is going public in a reverse merger with a blank check company.

Bojangles has carved a niche as a relatively unique concept in the competitive chicken segment. It is a bone-in chicken chain with a substantial breakfast daypart — 38 percent of its business comes before 11 a.m.

Breakfast, which Bojangles’ serves all day, has been a key element of the chain’s success, Rutledge said. And that 38 percent figure doesn’t include breakfast items the chain sells after 11 a.m.

“We think that’s an advantage for us,” Rutledge said. “It is a big part of our business. Last year we had a really good year. But even with other competitors getting into breakfast, it was still our fastest growing daypart.”

The 635-unit chain has average unit volumes of $1.8 million. Same-store sales have grown for 20 straight quarters, and revenue has increased an average of 12.8 percent a year from 2011 through 2014. Same-store sales were expected to increase 7.6 percent to 7.9 percent in the first quarter ended March 29.

Rutledge noted that the company’s sales growth stretches back further, to 2004. Its recent growth has come at a time when the market for chicken restaurants has flourished, with chains like Popeyes Louisiana Kitchen, Chick-fil-A, Zaxby’s, El Pollo Loco, Pollo Tropical and others flourishing.

“Our culture is our secret sauce,” Rutledge said. “It’s about our teams and our people. But the food is the start of the brand. At the end of the day, that’s what it’s all about, giving that craveable food to our ‘Bo-Fanatics.’ It’s why we’ve been consistent for so many years.”

Bojangles has locations in 10 states, including its core markets of North Carolina and South Carolina. But don’t expect that number to jump soon. Although the company plans to grow from 7 percent to 8 percent a year, it will concentrate on those 10 markets for unit development, expanding only after existing markets are well developed.

“When adjacent states become core markets, that will lead us to the next state we’re going into,” he said. “We’re going to be disciplined. You won’t see us jumping states and going into Texas or California.”

Bank of America Merrill Lynch, Wells Fargo Securities, Jefferies, Barclays, Goldman Sachs, Piper Jaffray, William Blair, KeyBanc Capital Markets and RBC Capital Markets are the joint bookrunners on the IPO.

This story has been revised to reflect the following update:

Update: May 8, 2015  This story has been updated with more recent stock information and quotes from Bojangles CEO Clifton Rutledge.

Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze

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