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Consumer Stocks, Independent Stock Research, IPO Research, Stock Research, The Battle Road IPO Review

Annie’s IPO: Minneapolis Meets Berkeley

Annie's logo

The most recent acquisition of a company in our Battle Road IPO Review universe occurred when General Mills (NYSE: GIS) bought Annie’s (NYSE: BNNY), a developer of natural and organic foods, with 145 products sold through 35,000 retail locations. On September 22, Annie’s rose by 36 percent, following a $46 per share all-cash offer which valued the company at $820 million, or roughly 3.2 EV/sales on 2014 projected revenue, and 40x Consensus EPS projections for 2015.

At first glance, the purchase price of Annie’s, which values the company at $5.7 million per food product, may appear to be a bit indulgent. That is, until one considers the national trend toward healthy eating, and the widespread consumer distrust of processed food, which some are linking to diabetes, heart disease, and, in extreme cases, cancer.

Annie’s, founded by Annie Withey and Andrew Martin in Connecticut in 1989, began with an organic approach to macaroni and cheese, and became successful by injecting organic ingredients into all of their products, and by building up successful distribution outside of the super market mainstream, dominated by the packaged food companies. After a series of business combinations, Annie’s received a capital infusion from Solera Capital, which moved the company’s headquarters from Boston to Berkeley.

The trend toward natural foods and healthy eating has naturally caught the attention of the packaged food giants in the US.  So it was that General Mills, the 150 year-old packaged food processor founded by Cadwallader Washburn and John Crosby only a year after the conclusion of the American Civil War, and renowned for such brands as Cheerios, Green Giant, Bugles, Lucky Charms, Trix, Cocoa Puffs, Franken-Berry, Gold Medal Flower, and Bisquick, elected to make a tender offer for Annie’s. The proposed acquisition, which has already received regulatory approval, brings to a conclusion the brief public company history of Annie’s, whose IPO occurred less than 32 months ago on March 28, 2012 IPO at a price of $19 per share.

 

Cloud Based Software, Energy Research, Internet Equity Research, Internet Stocks, IPO Research, Stock Research, The Battle Road IPO Review

Opower: Providing Power to the People

opower logoBased in Arlington, VA, Opower (NYSE: OPWR), provides cloud software to the utility industry. Opower’s software helps consumers gain insights into energy consumption, and ways to reduce energy costs. Founded in 2007, the company generated $89 million in sales in 2013, and operated at a $14 million loss. For 2014, Consensus estimates suggest the company will record $128 million in revenue and record a loss per share of $0.67. In 2015, revenues are expected to grow by 17 percent, and the company is expected to post a similar loss.

Opower debuted on the NYSE on April 3, 2014 in a 6.1 million share IPO, which opened at $19 per share, in a transaction that raised over $100 million for the company. The transaction was led by Morgan Stanley, Goldman Sachs, Allen & Company, Pacific Crest, and Canaccord Genuity. At a recent share price of $18.00, the company’s market cap. is about $880 million.

Opower sells software to public utilities which in turn provides their customers with important insights into their energy consumption and usage, including peak day alerts, consumption trends, and tips on how to reduce energy costs. Public utilities are under pressure from regulators to reduce the number of fossil fuel emitting power plants, utilize cleaner sources of energy, and reduce energy fees, in return for maintaining what is in many cases a near monopolistic position in the markets they serve. Public utilities, have, in a sense, been forced to expend some of their resources on energy efficiency programs through which they provide incentives to consumers to utilize more efficient methods for cooling and heating.

At the end of 2013, Opower served 93 utility companies in eight countries, including over half of the 50 largest utilities in the US. Recently, Opower launched a program at CLP Power Hong Kong, the country’s largest power company. In 2013, customer concentration was high, as Opower’s top 10 customers accounted for 62 percent of sales. Three of these customers—National Grid, Pacific Gas & Electric, and Exelon each accounted for more than 10 percent of sales. For the six months ended June 30th 2014, two customers each accounted for 11 percent of sales, so it would seem that customer concentration is beginning to decline.

Opower counts among its competitors privately-held Aclara and Tendril, as well as the Nest Labs division of Google. Post-IPO Opower has a strong balance sheet, with nearly $150 million in cash and no debt.

To learn how Opower screens against its cloud-based software peers in the Battle Road IPO Review Software coverage universe, please contact: info@battleroad.com.