Companies and Brands

Blue Buffalo Gears Up for Secondary Offering

Chris Lange

Published: June 28, 2016 11:11 am

Last Updated: January 13, 2020 6:16 am

Blue Buffalo Pet Products, Inc. (NASDAQ: BUFF) filed an amended Form S-1 with the U.S. Securities and Exchange Commission (SEC) regarding its secondary offering. The company is offering 15 million shares with an overallotment option for an additional 2.25 million shares. At Monday’s closing price ($23.38), the entire offering is valued at up to $403.31 million.

Keep in mind that this company has a market cap of roughly $4.5 billion, and this offering makes up about 9% of the total cap.

The underwriters for the offering are JPMorgan, Citigroup, Barclays, Deutsche Bank Securities, Morgan Stanley, and Wells Fargo.

This is the fastest growing major pet food company in the United States, selling dog and cat food made with whole meats, fruits and vegetables, and other high-quality, natural ingredients. Blue is a billion-dollar brand and is the top brand in the Wholesome Natural market segment.

The company currently has roughly a 6% share of the U.S. pet food market and feeds only 2% to 3% of the 164 million pets in the United States. With a proven new user acquisition strategy, Blue Buffalo is committed to converting more pet parents into True Blue Believers and continuing to increase its share of the attractive $27 billion U.S. pet food market.

In the filing, the company detailed:

Our net sales have grown from $190 million in 2010 to $1,027 million in 2015, which represents a compound annual growth rate, or CAGR, of 40%. During this period, our operating income grew from $15 million to $160 million, which represents a CAGR of 61%, while our net income grew from $23 million to $89 million, which represents a CAGR of 31%. Given the size and scale we have reached, we expect our growth rates to moderate in the future. We believe that only a few public U.S. CPG [consumer packaged goods] companies have our combination of scale, significant growth and strong margins. Our adjusted net income and net income for 2015 was $122.5 million and $89.4 million, respectively.

The company will not receive any proceeds from the offering instead the selling shareholders will.

Shares of Blue Buffalo were last trading down 1.9% at $22.94, with a consensus analyst price target of $25.80 and a 52-week trading range of $15.19 to $28.80.