Domino's, the nation's second-largest pizza chain, says it plans to go public, trying to turn 44 years of deep-dish, thin-crust and hand-tossed pies into as much as $400 million for the company and its shareholders.
The Ann Arbor, Mich., company, formally known as Domino's Pizza Inc., will offer 24.1 million shares at an estimated price of $15 to $17 each. The stock, which will trade on the New York Stock Exchange under the ticker symbol DPZ, is expected to begin trading as soon as Tuesday, according to two people familiar with the plans who declined to speak publicly in advance of the IPO.
The company said it will use the proceeds to pay down debt. It has about $943 million in long-term obligations.
Dominos estimates the IPO will generate about $137 million for the company and $219 million to $273 million for stockholders, according to filings with the Securities and Exchange Commission. Holly Ryan, a Domino's spokeswoman, declined to comment on the IPO.
Analysts said the offering comes at a tough time for pizza chains, which are struggling to grow in the face of heightened competition from local independent pizza restaurants and a raft of frozen pies now sold in supermarkets.
"The chain pizza industry has just not demonstrated strong growth in the recent past," said Ron Paul, president of Technomic Inc., a Chicago food industry consulting group.
Pizza Hut, the nation's biggest pizza chain, controls an estimated 19.5 percent of the market, followed by Domino's, at 11.6 percent, and Papa John's, at 6.6 percent, according to Technomic. Pizza Hut is owned by Yum Brands Inc. of Louisville, Ky., which includes the Taco Bell and KFC chains. Papa John's International Inc. is also based in Louisville.
Still, the biggest share of the market belongs to independent pizza restaurants, which control an estimated 47.8 percent of the market.
In 2003, Domino's sales rose 2.6 percent to $3 billion, but Pizza Hut's fell 1.4 percent to $5 billion and Papa John's dipped 2.4 percent to $1.7 billion.
Domino's, founded in 1960 by brothers Thomas S. and James Monaghan, now has 7,450 company-owned and franchise stores worldwide. About 90 percent of Domino's stores are franchised. For the fiscal year ending Dec. 28, 2003, the company reported income of $39 million and revenue of $1.3 billion.
In 1998, Thomas Monaghan announced his retirement from Domino's and sold most of his stake in the company to Bain Capital for $1 billion. Bain intends to reduce its holdings from 65 percent to 44 percent of the company's stock by selling shares in the IPO for a potential gain of as much as $131 million, SEC filings show. Monaghan will reduce his remaining stake from 6.3 percent to less than 1 percent for a potential gain of $9 million.
Domino's greatest store growth has come from outside the United States. The chain has added nearly 400 international stores since 2000, according to the SEC documents, compared with about 100 stores domestically.
Steve Coomes, an industry analyst and senior editor of Pizzamarketplace.com, an online trade publication, predicts Domino's will have difficulty producing high earnings per share in a saturated market. "There is pizza everywhere," he said. "They are like car dealerships."
But Domino's has nearly instant name recognition. "The name is undeniable in recognition as a brand," said David Menlow, president of IPO Financial Network, which analyzes public offerings.