CurrentOfferings.com Story:

Domino's Pizza IPO Prices Below Targets

By Nicole Maestri, July 12, 2004

NEW YORK (Reuters) - At the start of a busy week for initial public offerings, Domino's Pizza Inc. priced its IPO below estimates, raising a less-than-expected $337 million, the underwriter said on Monday.

The pizza chain priced 24.1 million shares at $14 per share, below its estimated range of $15 to $17 per share.

The lower-than-expected pricing could be a sign the week's heavy supply of deals, which include the $2.25 billion IPO for Freescale Semiconductor Inc., is outweighing demand, said Tom Taulli, co-founder of Current Offerings, which tracks IPOs.

But the pricing also reflected issues specific to Domino's, analysts said.

"While Domino's has established a strong brand name, extensive selling by investors and executives on the IPO, large dividends paid to insiders in the June 2003 recapitalization and excessive cash compensation packages granted to top management are turn-offs," said a Renaissance Capital IPOhome.com report.

Of the 24.1 million shares sold in the IPO, stockholders sold 14.7 million shares, according to regulatory filings.

Private equity firm Bain Capital, which beneficially owned 65 percent of Domino's common stock before the offering, will have a 44 percent stake after the deal, according to filings.

"You have a lot of private equity involved in this deal, said Taulli. "They're trying to get liquidity of it so they just want to get this thing out" to the market.

Freescale, a Motorola Inc. (MOT.N: Quote, Profile, Research) spin-off, is expected to price on Thursday and begin trading on Friday, according to Dealogic.

"Semis aren't doing that hot right now, so that could be concerning," Taulli said.

Shares of semiconductor and equipment makers slumped on Monday on concerns about possible oversupply and slack demand.

Merrill Lynch's downgraded the global semiconductor sector to "underweight" from "overweight," and cut its forecast for the sector's 2005 revenue growth to 6 percent from 16 percent, citing weaker average selling price assumptions and a lower unit forecast.

Other deals on the calendar for the week include the $650 million initial public offering of Blackridge Investment Corp., the Blackstone Group's business development company.

Underwriters for the Domino's Pizza deal are being led by JPMorgan and Citigroup, according to regulatory filings. Bear, Stearns & Co. Inc., Credit Suisse First Boston and Lehman Brothers will assist in managing the IPO.

Domino's Pizza operates more than 7,400 take-out and delivery stores, including franchises, in the United States and more than 50 countries.

The company has applied to list its shares on the New York Stock Exchange under the symbol "DPZ" (DPZ.N: Quote, Profile, Research) .