McDonald’s franchisee IPO raises 43% more

By Reuters
Posted April 13 at 4:55 p.m.

Arcos Dorados Holdings, a large South American franchisee of U.S. fast-food chain McDonald’s sold more shares than originally planned at a price above the proposed range in an IPO on Wednesday, a source familiar with the deal said.

The company and its shareholders sold 73.5 million shares for $17 each, raising $1.25 billion, the source said. They had planned to sell 62.5 million shares for $13 to $15 each.

The source, who spoke on condition of anonymity because the details have not been officially announced, also said the deal was roughly 10 times oversubscribed, garnering demand from retail and institutional investors around the world.

Although close to three-quarters of the investors were U.S.-based, the IPO especially appealed to large funds focused on Latin American and global growth, the source told Reuters.

Argentina-based Arcos Dorados, which means Golden Arches in Spanish, is the largest McDonald’s franchisee in terms of sales and number of restaurants, accounting for more than 5 percent of the hamburger chain’s global sales in 2010, according to a filing with U.S. regulators.

The firm, run by a veteran of the industry in the region, is setting up to benefit from the growing modernization in Latin America as more and more people adopt faster-paced lifestyles that rely on convenient food.

Perhaps betting on the booming growth, Arcos snatched valuations far beyond its U.S. parent: Based on 2010 earnings and the IPO price of $17, Arcos shares have a price-to-earnings valuation of 38.6, more than double that of McDonald’s.

Chief Executive Woods Staton, who has been running various McDonald’s operations in Latin America for more than 20 years, planned to buy 2 million shares in the offering at the IPO price, according to the filing.

Arcos Dorados shares are expected to begin trading on the New York Stock Exchange on Thursday under the symbol “ARCO” (ARCO.N).

Bank of America, JPMorgan, Morgan Stanley, Itau BBA and Citi underwrote the IPO.

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