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Dunkin’ could make public debut this year

Canton firm reportedly in initial IPO talks

By Jenn Abelson and Beth Healy
Globe Staff / April 1, 2011

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Dunkin’ Brands Inc. is in preliminary talks about taking the company public later this year, according to several officials briefed on the discussions.

The Canton owner of Dunkin’ Donuts is weighing a roughly $500 million initial public offering in the second half of the year. The talks are still in the early stages and a bank has not yet been selected to lead the IPO, said the officials, who declined to be named because the information is not public.

“It’s no surprise that Dunkin’ would be looking at an IPO in the back half of the year,’’ said one of the officials. “But it’s very premature to talk about specifics.’’

The push to take the business public, first reported by Reuters, comes six years after private equity firms, including Boston’s Bain Capital Partners and Thomas H. Lee Partners, purchased Dunkin’ for $2.4 billion.

Dunkin’, which also runs ice cream chain Baskin-Robbins, has accelerated its growth in recent years and opened 574 net new locations worldwide in 2010. The company reported global system-wide sales of $7.7 billion in 2010, up from $6.4 billion in 2006 when the buyout companies took over Dunkin’ Brands.

“We do not respond to rumors or speculation,’’ said Michelle King, a Dunkin’ Brands spokeswoman. “We are focused on operating our business and helping our franchisees drive revenues and profits at their restaurants.’’

Dunkin’s discussions come as other local businesses, including service ZipcarInc., go public. Improving market conditions have prompted buyout companies to move ahead on initial public offerings, said David Menlow, founder of research company IPOfi nancial.com.

“Private equity firms have their own shareholders, and the fundholders are screaming for profits. So it becomes a financial imperative for these firms to try and monetize these investments by bringing them public,’’ Menlow said. “Dunkin’s name is going to have quite a bit of attraction. It’s obviously very ubiquitous. But it’s going to come down to how much debt this company has and what their ability will be to service it and pay it down.’’

In November 2010, Dunkin’ Brands refinanced nearly $2 billion in debt and the proceeds were used to repay outstanding debt and pay a cash dividend to Dunkin’s shareholders.

Jim Coen, president of Dunkin’ Donuts Independent Franchise Owners, said he hopes the capital raised from any public offering will go toward helping the company grow and innovate.

“We hope that any money will go back into the brand,’’ Coen said. “Going public will add transparency. But it will also drive the need for quarterly growth. And that’s a concern to franchise owners who have been growing their businesses for over 50 years.’’

Dunkin’ was sold off to private equity firms after parent company Allied Domecq, a public British spirits business, was acquired by French distiller Pernod Ricard SA in 2005. Buyout companies raise money from endowments, pension funds, and wealthy individuals. They use that cash, plus money they borrow, to buy controlling stakes in existing businesses. The goal is to make the acquired companies more profitable — and eventually sell them or take them public.

Moving forward with an IPO will allow Dunkin’s investors to raise capital and still keep a fair amount of equity in the business, according to Dennis Lombardi, executive vice president of food service strategies at WD Partners. For example, Bain Capital, which declined to comment, still retains sizeable stakes in other companies it took public, such as Domino’s Pizza and Sensata Technologies in Attleboro.

Consumers are unlikely to see any short-term major changes at the chain if Dunkin’ goes public, Lombardi said. But the money raised could be used to open more stores and create new product lines.

“There will be a lot closer scrutiny of how the brand is performing when it goes public,’’ Lombardi said.

Jenn Abelson can be reached at abelson@globe.com; Beth Healy at BHealy@globe.com.

Dunkin? Donuts milestones

1950 Bill Rosenberg?s ?Open Kettle?? doughnut shop changes its name to Dunkin? Donuts.

1955 First franchise agreement signed in Worcester.

1970 First overseas Dunkin? Donuts opens in Japan.

1972 Munchkins doughnut holes introduced.

1978 First network TV commercials air.

1982 ?Fred the Baker, Time to Make the Donuts?? ad campaign begins.

1990 Allied Domecq PLC purchases Dunkin? Donuts.

2000 DunkinDonuts.com launches.

2004 Company headquarters moved to Canton.

2006 Dunkin? Brands, parent company of Dunkin? Donuts, is acquired by a consortium of private equity firms: Bain Capital, Carlyle Group, and Thomas H. Lee Partners.

?America Runs on Dunkin??? campaign begins.

2007 Dunkin? Donuts partners with other companies to sell coffee at retail outlets, including supermarkets and club stores, and nontraditional foodservice locations.

2011 3000th international Dunkin? Donuts opens in Shanghai.