Investors rush to snap up initial offering of Snapple

December 16, 1992|By New York Times News Service

NEW YORK -- Wall Street, which sifts through dozens of new high-tech ideas daily, went back to basics yesterday and put its hands around a bottle of iced tea.

In one of the year's hottest new stock offerings, investors helped themselves yesterday to an initial public offering of 4.4 million shares of Snapple Holding Corp., a leader in selling New Age beverages. In the process, Snapple's stock soared, at one point selling at more than 68 percent above its initial selling price.

Until late last week, underwriters at Merrill Lynch & Co. and Paine Webber Inc., the lead managers for the offering, set the prospective price at $15 a share. That target was raised last Thursday because of extremely strong institutional demand, and the stock was offered yesterday at $20 a share.

Snapple, which has 52 beverage lines but is best known for its iced tea, greatly exceeded that level once the shares began to trade. The first transaction in over-the-counter trading was completed at $31 a share, and the stock reached as high as $33.75.

The stock closed at $29 on volume of 6.6 million shares.

"We expected the stock to trade up, but nobody could predict on Monday night what level of retail interest there would be," said James F. Miller, a director in equity capital markets at Merrill Lynch. "But Snapple's product made this easy to sell."

Despite the deal's overwhelming reception, "we didn't make a whole lot of friends," Mr. Miller said. "There were a lot of people who wanted more stock than they got," he added.

From its original market in metropolitan New York, Snapple has grown rapidly in recent years, and its iced teas, fruit drinks, natural sodas and seltzers and sports drinks are now available nationwide.

Revenues have expanded almost exponentially, to $95 million last year from $13.3 million in 1988. For the first nine months of 1992, the company had revenues of over $177 million, more than double the revenue from the same period a year ago.

Virtually all of the $88 million raised from the equity offering will be used to pay off $90 million in debt Snapple took on last March when Thomas H. Lee, the Boston leveraged buyout specialist, and Snapple's executives bought the company for $130 million. Even after yesterday's offering, Mr. Lee and his partners still own more than 60 percent of the company.

Snapple's variety of iced teas have been particularly popular and by the end of September held more than 18 percent of that market.

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