Shake Shack Inc., the New York-based gourmet burger chain, priced its initial public offering of five million shares on Thursday at $21 per share, above the revised range of $17 to $19 per share, raising $105 million. Following the offering, more than 11 million shares of Class A common stock and more than 24 million shares of Class B stock will be outstanding, equating to a market cap of about $735 million. If underwriters were to exercise their option to purchase an additional 750,000 shares, the company would add nearly $16 million to its total. The shares are expected to begin trading on Friday under the ticker symbol on the New York Stock Exchange. JPMorgan Securities LLC and Morgan Stanley & Co. LLC are leading the offering. Additional underwriters include Barclays Capital Inc., Goldman, Sachs & Co., Jefferies LLC, William Blair & Co. LLC and Stifel, Nicolaus & Co. Legal advisers involved with the IPO include Latham & Watkins LLP and Fried, Frank, Harris, Shriver & Jacobson LLP. Net proceeds from the offering will ultimately be used by SSE Holdings LLC, the predecessor to Shake Shack Inc., to pay fees and expenses of at least $3 million and to repay borrowings under its revolver of about $36 million, which includes nearly $22 million of borrowings used to pay a distribution to the original owners of SSE Holdings. The remaining amount will be used for general corporate purposes, including opening new locations and renovating existing restaurants. As of Sept. 24, Shake Shack had about $6 million in cash, which added to the roughly $66 million in cash likely to be remaining after borrowings and fees are paid, would total about $70 million. When that amount is subtracted from the market cap, that would equate to an enterprise value of close to $665 million, or a taste bud-popping 66.5 times the $10 million in Ebitda it generated for the fiscal year ended Dec. 25, 2013 The company's A/B share structure will leave founder Danny Meyer, the famed new York restaurateur, and his private equity backers, in control of the company. Following the offering and exclusive of the underwriters option, private equity firm Leonard Green & Partners LP will have a 26.1% stake in the company, Meyer will maintain a 21.3% stake, and Select Equity Group LP, controlled by George Loening, will have a 12.3% share. Alliance Consumer Growth LLC will hold a 6.1% stake, while Jeff Flug, who has served in various executive capacities in the past and is a board member, will own a 4.6% stake. Shake Shack said it has 63 locations in nine countries, with 36 in the U.S. and 27 overseas. All of the overseas locations are licensed, in addition to five of its U.S. stores. The chain owns and operates 31 of its U.S. locations. The restaurant chain had system-wide sales of $140 million in 2013, compared to $81 million in 2012, it said in its regulatory filings. Of those totals, $79 million in sales were generated in 2013 by company-operated stores. In 2012, that number stood at $56 million. Sales generated at company-operated stores count as part of revenue, whereas only a small percentage of sales of licensed operations collected as a royalty by Shake Shack is included in revenue, although it is mostly profit. For the fiscal year ended Dec. 25, 2013, Shake Shack had about $82 million in revenue, compared to approximately $57 million for the same period a year prior. Net income for the most recent fiscal year, meanwhile, was above $5 million, compared to just above $4 million for the same period the year before. Adjusted Ebitda for the fiscal year ended Dec. 25, 2013, was more than $14 million, while Ebitda was over $9 million, compared to nearly $10 million in adjusted Ebitda and close to $7 million in Ebitda for the same period a year prior. Meyer's Union Square Hospitality Group launched the burger and milk shake concept as a kiosk in 2004 in New York City, slinging Chicago-style hot dogs, along with its famous shakes, burgers and frozen custard. Union Square Hospitality also operates New York eateries Blue Smoke, Gramercy Tavern and Union Square Cafe among others. It competes with rapidly expanding chains such as Five Guy Enterprises LLC, Smashburger Master LLC and In-N-Out Burgers Inc. Read more from:
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