Pet food maker Freshpet sets terms for $135 million IPO

Freshpet, which sells refrigerated pet food via custom refrigerators installed at over 12,500 retail stores, announced terms for its IPO on Monday. The Seacaucus, NJ-based company plans to raise $135 million by offering 10.4 million shares at a price range of $12 to $14. At the midpoint of the proposed range, Freshpet would command a fully diluted market value of $414 million.

The company cites a growing trend of "pet humanization" in the US where owners treat their pets as family members, along with the popularity of fresh, natural and organic food products among US consumers. Freshpet manufactures and delivers its refrigerated pet food through company-owned "Freshpet Fridges" installed at blue-chip retail chains including Wal-Mart (WMT; 1,600 Fridges), Petco (1,350), PetSmart (PETM; 1,300), Kroger (KR; 970), Target (TGT; 1,150) and Whole Foods (WFM; 200).

The company is backed by growth equity from MidOcean Partners and an investment vehicle co-owned by Chairman and CEO Charles Norris and Kayne Anderson Capital Advisors. Tyson Foods (TSN) is also a stockholder.

Revenue increased 38% to $40 million during the six months ended June 30, 2014 as the company increased the number of installed Freshpet Fridges store locations from 9,800 to 12,600. Gross margin expanded 175 bps to 48.7%, which the company expects to rise as it achieves scale. Freshpet's adjusted EBITDA swung positive to $400,000 from a $1.8 million loss during the prior year period. The company held $84 million of debt at quarter-end.

Freshpet, which was founded in 2004 and booked $74 million in sales for the 12 months ended June 30, 2014, plans to list on the NASDAQ under the symbol FRPT. Goldman Sachs and Credit Suisse are the joint bookrunners on the deal. It is expected to price during the week of November 3, 2014.