Reuters: Hot Stocks: UPDATE 1-Organic grocer Sprouts Farmers shares double in debut

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UPDATE 1-Organic grocer Sprouts Farmers shares double in debut Aug 1st 2013, 17:11 Thu Aug 1, 2013 1:11pm EDT * Market value touches $5.60 bln * Shares open at $35 after pricing at $18 (Adds details, analyst comment, updates share movement) By Neha Dimri Aug 1 (Reuters) - Shares of organic grocer Sprouts Farmers Market Inc more than doubled in their market debut as investors scrambled for a stake in the fast-growing health food industry. The company, backed by private equity firm Apollo Global Management LLC, was worth about $5.60 billion at the highest trading price on Thursday morning. Sprouts operates more than 160 stores across the United States, selling everything from fresh fruit to homemade burgers. The company's products are priced lower than those of competitors, including Whole Foods Markets, said Francis Gaskins, a partner at IPO research company IPODesktop.com. "They have a very good business model going forward." Sales of natural and organic food in the United States rose about 12 percent annually between 1997 and 2011, when the market was worth about $43 billion, according the Nutrition Business Journal. The market is expected to grow by about 10 percent annually through 2020, the industry magazine said. Shares of high-end grocery store chain Fairway Group Holdings have risen about 90 percent since their debut in April, while those of health-food chain Natural Grocers by Vitamin Cottage Inc have more than doubled since going public in July 2012. Sprouts, founded in 2002, reported net income of $19.5 million for 2012, compared with a loss of $27.4 million in 2011. Net sales on a pro forma basis rose 16 percent to $2 billion. Market leader Whole Foods, which has about 350 stores, recorded sales of $11.7 billion for the year ended September 2012. Sprouts was acquired by Apollo in 2011 and merged with Henry's Farmers Market, another Apollo holding. Sprouts was again merged with grocer Sunflower Farmers Market last year. Apollo's stake in Sprouts has been diluted to 45.4 percent after the offering from 51.8 percent. Private equity firms are looking to cash out their investment in portfolio companies as U.S. stock markets trade at record highs. Total proceeds from IPOs during the second quarter rose to $13.1 billion from $7.8 billion in the first quarter. Private equity firms accounted for 71 percent of IPO volume, according to PricewaterhouseCoopers. (link.reuters.com/byc22v) Goldman Sachs and Credit Suisse Securities were the lead underwriters to the Sprouts offering. Sprouts Farmers Market shares opened at $35 on the Nasdaq, compared with their offer price of $18. The offering of 18.5 million shares raised $333 million. The stock was up 104 percent at $36.73 in early afternoon trading after touching a high of $38.99. About 10.6 million shares had changed hands by 1305 ET. (Reporting by Neha Dimri in Bangalore; Editing by Joyjeet Das) Link this Share this Digg this Email Reprints

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