Shares of Arcos Dorados Holdings, a large South American franchisee of fast-food chain McDonald’s, rose 27 percent in their stock market debut as investors clamored for exposure to the famous brand in a region with booming consumer spending.
The shares were up $4.60 at $21.60 in Thursday morning trading on the New York Stock Exchange after an upsized IPO that priced above the proposed range and raised $1.25 billion.
Argentina-based Arcos Dorados, whose name means “golden arches” in Spanish, is the largest McDonald’s franchisee by sales and number of restaurants, taking in about 5 percent of all money spent at the hamburger chain around the world in 2010, according to a filing with U.S. regulators.
Arcos Dorados has been setting up to benefit from the growing modernization in Latin America as more and more people adopt fast-paced lifestyles that rely on the convenience of fast food.
“It’s a company that obviously has great brand recognition … and it’s in a wonderful part of the world,” said Edward Jones analyst Jack Russo.
“Versus the U.S. and Europe … there is more opportunity for growth” in South America, he said.
Arcos Dorados garnered demand from predominantly U.S.-based investors focusing on Latin American and global growth, a source familiar with the deal previously told Reuters.
Based on its initial public offering on Wednesday, the company has a market cap of more than $4.6 billion, according to Francis Gaskins, an analyst at IPO Desktop.
Analysts have highlighted Arcos Dorados as a way to invest in a blue-chip brand with exposure to the hot consumer sector in an emerging market. Consumer-oriented companies in Latin America have been benefiting from the region’s growth of middle-class spending and overall incomes.
Arcos Dorados became a franchisee in 2007 and now has some 1,700 McDonald’s-brand restaurants in 19 countries in South America and the Caribbean, predominantly in Brazil.
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 IPO, according to a filing with U.S. regulators.
The Colombian-born Staton brought the McDonald’s brand to Argentina in the 1980s, helped develop it in Latin America, and bought out the regional operation in 2007.
The company and its shareholders sold 73.5 million shares at $17 each in the IPO, after planning to sell 62.5 million shares at $13 to $15 each.
The company said it agreed with McDonald’s to use the bulk of net proceeds from the IPO for capital expenditures, including opening and remodeling restaurants.
Shares of McDonald’s were little changed at $76.84 in morning NYSE trading.
Bank of America, JPMorgan, Morgan Stanley, Itau BBA and Citigroup underwrote the IPO.