IPO Outlook: Is The Market Hungry For Chicken Processor Wayne Farms? - Alarm.com Holdings (NASDAQ:ALRM), AppFolio (NASDAQ:APPF)

Wayne Farms Inc WNFM, the sixth largest producer and processor of broiler chickens, plans to raise over $300 million in its IPO this Thursday. The company is being spun off from parent Continental Grain. Wayne Farms expects to offer over 12.8 million shares between $18 and $21 per share. The company will list on the NASDAQ under the ticker WNFM. At the midpoint of the range, Wayne Farms would have a market cap of $1 billion.

A Closer Look At Wayne Farms

As a wholly-owned subsidiary of Continental Grain, Wayne Farms has emerged as the sixth largest integrated producer and processor of broiler chickens (chickens raised solely for meat rather than laying eggs) in the United States. The company functions primarily as a B2B provider of fresh and prepared chicken products to retailers, distributors and foodservice operators.

Wayne Farms offers fresh and deboned marinated, breaded, cooked and wrapped frozen products to its customers in the United States and 29 other countries. As an industry leader, some of the company’s customers include names like Chick-fil-A, Nestlé, Boar’s Head and Costco.

Wayne Farms' Business Model

According to its S-1, “Wayne Farms employs more than 9,000 people and has the capacity to process more than 6.5 million birds per week, totaling more than 2.7 billion pounds of live chicken annually.” The company doesn’t promote its own brand, but still manages to control all aspects of operation from breeding chickens to the marketing and managing the final product. With this business model, Wayne Farms is better able to serve customers by better managing food safety and quality, as well effectively controlling margins and enhancing customer service.

The company has nine integrated complexes consisting of hatcheries, fine feed mills, slaughter processing and prepared food plants spanning six states in the southeastern United States.

According to the USDA, “the U.S. consumes more chicken than any other animal protein (approximately 33.0 billion pounds projected in 2015). The U.S. is the world’s largest producer of chicken and is projected to produce about 40.0 billion pounds of broiler meat this year, which represents 20.6 percent total worldwide population. China and Brazil are the second and third largest producers with 15 percent and 14.9 percent of market share.”

Wayne Farms’ growth strategy is to leverage its existing customer base to further drive sales and market share, provide new innovative products and processes like its new chicken sausages and waffle bites to capitalize on industry consolidation. Wayne Farms noted in its S-1 that “the U.S. poultry industry continues to remain fragmented with a large percentage of producers comprised of smaller family-owned businesses.”

Wayne Farms' Competition

The two top competitors in the market,

Tyson Foods, Inc.TSN

and

Pilgrim’s Pride CorporationPPC

, have a combined 38 percent market share. Thirteen companies make up the next 50 percent of the market. One way Wayne Farms plans to drive this consolidation is through making acquisitions of processing plants like it did with a facility in Dothan, Alabama in 2013.

Financials

Starting with the top line, Wayne Farms saw revenue grow from $1.4 billion in 2011 to $2.23 billion in 2015.

Net income has enjoyed growth during the first quarter and last three years reported as gains. For the fiscal year ending 2015, net income rose to $214.5 million, up 85.8 percent from $115.4 million in 2014. Since 2011, Net income has shown steady increases and growth. Profit margins are also increasing over this same period.

Wayne Farms has $57.3 million in cash. Total assets and liabilities are listed at $806.7 billion and $709.5 billion, with long-term debt of $155.8 billion.

Following this offering, Continental will control 76 percent of Wayne Farms as the principal stockholder with over 40.7 million shares. Chairman, CEO and President Paul Fribourg of Continental also has 76 percent control of Wayne Farms.

Pricing Info

Wayne Farms expects to offer 12.8 million shares between $18 and $21 per share through the main underwriters Citigroup, JPMorgan and BMO Capital Markets. The company will list on the NASDAQ under the ticker WNFM. The offering is expected to price Wednesday night.

Other Offerings

Thursday, June 25

Catabasis Pharmaceuticals Inc CATB plans to offer 4.3 million shares at an expected price range of $13 to $15 per share through Bank of America Merrill Lynch, Wells Fargo Securities and Citigroup.
CNX Coal Resources LP CNXC plans to offer 10.0 million shares at an expected price range $19 to $21 per share through Credit Suisse, JPMorgan and Evercore ISI.
Gener8 Maritime, Inc. GNRT plans to offer 15.0 million shares at an expected price range of $17 to $19 per share through Citigroup, UBS and Jeffries.
Glaukos Corp GKOS plans to offer 5.4 million shares at an expected price range of $13 to $15 per share through JPMorgan, Bank of America Merrill Lynch and Goldman Sachs.
Lantheus Holdings Inc LNTH plans to offer 7.9 million shares at an expected price range of $8.50 to $10.50 through Citigroup, Jeffries and RBC Capital Markets.
Milacron Holdings Corp. MCRN plans to offer 14.3 million shares at an expected price range of $20 to $22 per share through Bank of America Merrill Lynch, Barclays and JPMorgan.
TransUnion TRU plans to offer 29.6 million shares at an expected price range of $21 to $23 per share through Goldman Sachs, JPMorgan and Bank of America Merrill Lynch.
Wayne Farms Inc WNFM plans to offer 12.8 million shares at an expected price range of $18 to $20 per share through Citigroup, JPMorgan and BMO Capital Markets.

Catabasis Pharmaceuticals Inc CATB plans to offer 4.3 million shares at an expected price range of $13 to $15 per share through Bank of America Merrill Lynch, Wells Fargo Securities and Citigroup.
CNX Coal Resources LP CNXC plans to offer 10.0 million shares at an expected price range $19 to $21 per share through Credit Suisse, JPMorgan and Evercore ISI.
Gener8 Maritime, Inc. GNRT plans to offer 15.0 million shares at an expected price range of $17 to $19 per share through Citigroup, UBS and Jeffries.
Glaukos Corp GKOS plans to offer 5.4 million shares at an expected price range of $13 to $15 per share through JPMorgan, Bank of America Merrill Lynch and Goldman Sachs.
Lantheus Holdings Inc LNTH plans to offer 7.9 million shares at an expected price range of $8.50 to $10.50 through Citigroup, Jeffries and RBC Capital Markets.
Milacron Holdings Corp. MCRN plans to offer 14.3 million shares at an expected price range of $20 to $22 per share through Bank of America Merrill Lynch, Barclays and JPMorgan.
TransUnion TRU plans to offer 29.6 million shares at an expected price range of $21 to $23 per share through Goldman Sachs, JPMorgan and Bank of America Merrill Lynch.
Wayne Farms Inc WNFM plans to offer 12.8 million shares at an expected price range of $18 to $20 per share through Citigroup, JPMorgan and BMO Capital Markets.

Friday, June 26

AlarmCom Hldg Inc ALRM plans to offer 7.0 million shares at an expected price range of $13 to $15 through Goldman Sachs, Credit Suisse and Bank of America Merrill Lynch.
AppFolio Inc APPF plans to offer 6.2 million shares at an expected price range of $12 to $14 per share through Morgan Stanley, Credit Suisse and Pacific Crest Securities.
Green Plains Partners LP GPP plans to offer 10.0 million shares at an expected price range $19 to $21 of through Barclays, Bank of America Merrill Lynch and Credit Suisse.
Innovation Economy Corp MYIE plans to offer 3.12 million shares at price $6.40 through TriPoint Global Equities.
Seres Therapeutics Inc MCRB plans to offer 6.3 million shares at an expected price range of $15 to $17 per share through Goldman Sachs, Bank of America Merrill Lynch and Leerink Partners.
Xactly Corp XTLY plans to offer 7.0 million shares at an expected price range of $10 to $12 per share through JPMorgan, Deutsche Bank and UBS.

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