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Tropicana IPO charges on
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July 16, 1998: 2:48 p.m. ET
Seagram files to sell 124.5M shares; market capitalization seen at $2.8B
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NEW YORK (CNNfn) - Seagram Co. is forging ahead with its plans for the sale of Tropicana Products Inc., the world's largest marketer and producer of branded juices, in an initial public offering.
The Bradenton, Fla.-based juice company filed an amended registration statement Thursday to sell 124.5 million shares at $21 to $23 each.
The filing comes amid speculation that Seagram -- which is selling Tropicana to help finance its $10.6 billion acquisition of Polygram N.V. -- is turning to private buyers in a negotiated transaction.
"We have always considered ourselves on a dual track," said Ray Boyce, Seagram spokesman. But the latest filing indicates that Seagram has decided to turn to the public market.
"The IPO continues to be the route we are pursuing and today's filing supports that," Boyce said.
Of the total offering, 112.5 million shares will be sold in the United States and 12 million will be sold internationally.
Tropicana will have 130.9 million shares outstanding immediately after the offering, yielding a total market capitalization of $2.8 billion.
But as the market cap has shriveled from previous estimates, some analysts expressed doubt about Tropicana's growth prospects, despite its two-year track record of profitability.
"The initial talk was for $3.6 billion. Now we're talking a valuation of $2.8 billion," said David Menlow, president of IPO Financial Network.
"The market is not going to be so tolerant of this particular offering if it is perceived that there won't be any growth," Menlow said.
Additionally Seagram is selling Tropicana at a time when the IPO market has weakened, investors said. "Typically, it has to be priced at a little bit of a discount," said Tom Rath, portfolio manager at Safeco Asset Management.
"During the second quarter, there was a real focus on the new 'nifty fifty.' The biggest cap growth stocks performed the best in the quarter. Small stocks didn't do so well and IPO's were tough," Rath said.
But the portfolio manager acknowledged that investors will be attracted to Tropicana's position in the $16 billion juice market. The company controls a dominating 71.2 percent share of the not-from-concentrate orange juice segment.
"In the case of Tropicana, it is something more readily valued. It's in a business that's more of a consumer staple. People are more comfortable assigning a value to it," Rath said.
As stated in earlier filings, Seagram is selling 95.1 percent of the company and will retain ownership of 4.9 percent.
While some analysts acknowledged that the magnitude of the Tropicana offering isn't surprising, it historically hasn't offered a premium to the seller.
For example, American Bank Note Holographics Inc., a manufacturer of secured holograms, went public with an initial offering of 13.6 million shares earlier this week. But the issue, which represented 100 percent of the holdings of the parent company, currency printer American Banknote Corp., was priced at $8.50 a share, well below the expected range of $10 to $12 a share.
-- by staff writer Robert Liu
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