Shares of AdvancePierre have clung tight to gains scored after a July 15 IPO initially was priced at $21 per share. In New York Stock Exchange trading, the company’s stock price has hovered between $23 and $24 per share, about 15 percent above the offering price.
The positive investor reception marks a dramatic turnaround for the company. Oaktree Capital Management LP acquired Pierre Foods during the 2008 recession out of bankruptcy. Two years later, Oaktree merged Pierre with Advance Foods Co. and Advance Brands LLC to form AdvancePierre.
Included in the stock offering were 18,600,000 shares of common stock, sizing the offering at $390 million. The offering included 11,090,000 shares sold by the company and 7,510,000 shares sold by existing shareholders. The latter group granted underwriters a 30-day option to purchase 2,790,000 additional shares of stock. Proceeds from the offering are to be used to repay debt.
With the IPO completed, funds managed by Oaktree Capital Management, LP, continue to own a majority of the AdvancePierre common stock. Of 78,586,202 shares to be outstanding after the offering, 60 percent will be owned by Oaktree funds (57 percent if underwriters exercise their full option).
Details about the company’s business were offered in a prospectus filed with the Securities and Exchange Commission in advance of the IPO.
AdvancePierre is a maker and distributor of ready-to-eat sandwiches, sandwich components and other entrees and snacks. The company holds the No. 1 or No. 2 market share positions in nearly all its product categories. It sells about 2,600 stock-keeping units targeted toward all day parts in three principal product categories:
1. Ready-to-eat sandwiches, including breakfast sandwiches, peanut butter and jelly sandwiches and hamburgers
2. Sandwich components, such as fully-cooked hamburger and chicken patties and Philly steaks
3. Other entrees and snacks, including country fried steak, stuffed entrees, chicken tenders and cinnamon dough bites.
Products are shipped frozen to customers and sold under the company’s brands as well as private label.
In its prospectus, the company promoted its vertical integration as a competitive advantage, allowing the company to add value and bolster margins.
“Our value-added processes include recipe formulation, pre-preparation by chopping, breading, seasoning and marinating, food preparation by baking, charring, frying and grilling, assembly and packaging,” the company said.
A measure of stability of the AdvancePierre business, the company sells to more than 3,000 customers with an average relationship tenure of 20 years with its largest 20 customers. The company described its business model as a “customer-centric” approach, rooted in research and development.
The company’s three core customer groups are food service, retail and convenience. Historically, the industrial channel was a target as well, but AdvancePierre has been winding down this business, which had been less profitable.