“The most likely use of cash would be a share repurchase, not a public float,” Dunkin’ CFO Neil Moses said yesterday said at a Morgan Stanley investor conference. “It might take the form of a share repurchase from our private-equity owners.”
Moses said the buyback would increase the company’s debt to more than five times earnings before interest, taxes, depreciation and amortization, or Ebidta, up from 4.2 times now.
By that calculation, the company would be taking on somewhere in the range of $200 million to $350 million in additional debt.
Dunkin’s PE owners — Bain, Carlyle Group and THL Partners — took the company public less than a year ago. Six of Dunkin’s 10 directors are from the PE firms.
The share repurchase would likely cut the PE firms’ combined equity stake from 30 percent to roughly 20 percent.
The move could be more fodder for attacks on the private-equity industry. Critics say the firms take money out in the form of dividends and buybacks, while saddling companies with burdensome debt.
Dunkin’ shares, whose shares are up 72 percent since it went public, rose 1.5 percent yesterday to close at $32.62.
“The risk to Dunkin’ shareholders is that Dunkin’ might not have the money to back up international growth” as planned, said John Gordon, a restaurant consultant from Pacific Management Consulting.
share repurchase, DunkinвЂ™ Brands, Neil Moses, Morgan Stanley, debt, Carlyle Group