El Pollo Loco Holdings Inc. is expected to begin trading this week, with the goal of raising $100 million that will be used in part to pay off debt.
The Costa Mesa, Calif.-based company said last week it would offer nearly 7.2 million shares priced between $13 and $15, according to filings with the Securities and Exchange Commission. The operator plans to list its stock on the Nasdaq Global Select Market under the symbol “LOCO.” It expects to begin trading on July 25.
At the mid-point, the initial public offering would raise about $90.3 million after expenses, which the company said it would apply toward paying down an estimated $288.8 million in debt. Underwriters also have the option of purchasing an additional 1.1 million shares of common stock, which would increase proceeds to about $104.2 million.
Straddling the quick-service and fast-casual segments, El Pollo Loco is known for its grilled chicken, which it has promoted as a more healthful alternative to fried chicken.
With 401 units, including 168 company and 233 franchised locations, the chain operates in California, Arizona, Nevada, Texas and Utah. Company officials say the chain has the potential to reach 2,300 units nationwide over the long term.
Texas, however, is a current growth market for El Pollo Loco, which in July sold six company-operated restaurants in the San Antonio area to franchisee AA Pollo Inc. Terms were not disclosed, but the deal is expected to close in September. AA Pollo has also agreed to develop and open eight more restaurants in that market, according to the filing.
Houston has also been targeted as a new growth market this year. The company has identified potentially 80 trade areas for development there, both corporate and franchise locations, with the first to open later in 2014, the filing said.
El Pollo Loco has staged a successful rebranding in recent years, boasting positive same-store sales growth in 11 consecutive quarters through March 26, with average unit volumes growing from $1.5 million in 2011 to $1.8 million at the end of 2013.
For the second quarter ended June 25, El Pollo Loco estimated same-store sales would rise between 4.9 percent and 5 percent, based on preliminary estimates.
For the first quarter ended March 26, El Pollo Loco reported net income of $5.4 million, an increase from a loss of $60,000 a year ago.
The company is coming off of three years of profit declines. In fiscal 2013, the company recorded a loss of $16.9 million, a loss of $7.9 million in fiscal 2012, and a loss of $32.5 million in 2011.
El Pollo Loco Holdings is owned primarily by asset-management firm Trimaran Capital Partners, under the entity Trimaran Pollo Partners, which holds a nearly 80-percent stake. Following the IPO, Trimaran will continue to hold about 44 percent to 46 percent of outstanding common stock, depending on whether underwriters exercise their option to buy additional shares.
Private-equity firm Freeman Spogli & Co. will also hold a 25-percent to 26-percent stake.
El Pollo Loco’s IPO comes at a time when investor interest in restaurant growth companies appears to be mixed.
Zoe’s Kitchen Inc., based in Plano, Texas, in April debuted on the New York Stock Exchange at $15 per share, and its stock price rose nearly 65 percent on the first day of trading. The stock, however, opened Monday at $28.45, at the low end of a range that reached a high of $35.59 earlier this year.
Papa Murphy’s Holdings Inc.’s saw more modest results with its IPO in May, with its stock close at $11.05 per share on its first day, at the low end of its expected range of $11 to $13 per share. On Monday, the Vancouver, Wash.-based take-and-bake pizza chain was trading in the $8.77 to $9 per share range, down from a high of $12.10 earlier this year.
Two restaurant chains that went public last year had big opening day pops, in terms of stock price, but investor enthusiasm has cooled somewhat.
Chicago-based Potbelly Corp., which debuted on the Nasdaq in August 2013, with a doubling of its stock price, has dipped below its opening day stock price of $30.77. On Monday, Potbelly opened at $11.52, after reaching highs of $33.90 over the past 52 weeks. The company earlier this month reported disappointing preliminary results for its second quarter.
Noodles & Company has also dropped from its high of $49.75 over the past year, and was trading in the $27 to $28 per share range on Monday.
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