Horizon Organic Dairy Raises $33M in IPO

BOULDER, CO—Horizon Organic Holding Corp. (HCOW), maker of Horizon Organic Dairy products, on July 2 completed its initial public offering of 3 million shares priced at $11/share. Concerns about a soft IPO market proved unfounded as HCOW began trading on the Nasdaq market at $13.37/share and closed at $15.06/share, up $4.06 in its first day of trading. Lead underwriter for the IPO was Hambrecht & Quist. Piper Jaffray and Hanifen Imhoff were co-managers.

“Horizon was priced on the high end of its initial filing range of $9/share to $11/share, and it opened at a premium, indicating there is demand in the market for good companies led by good underwriters,” says John Fitzgibbon, editor of IPO Reporter, published by Securities Data Publishing in New York.

Proceeds from the IPO will be used to retire debt accumulated from the purchase of a 4,000-acre organic dairy in Idaho and the acquisition in April of the Juniper Valley organic milk brand, says Barney Feinblum, Horizon’s CEO. “We will be able to retire debt and still keep about $20 million for strategic acquisitions and expansion of dairy facilities,” he says.

“Initially, we were led to believe it was a difficult market, but people hear the story of organic and they see the growth. The reception to our IPO is good news, not just for us, but for the industry overall,” says Feinblum.

Concurrent with the IPO, conventional dairy products manufacturer Suiza Foods Corp. (SZA), which has been processing Horizon organic milk products in its Reno, NV, facility since 1995, agreed to purchase in a private sale 1.1 million shares of HCOW at $11/share. The purchase, valued at $12.1 million, gives SZA a 12% stake in Horizon, making it one of HCOW’s largest shareholders, according to Feinblum.

Horizon also will enter into five-year processing and distribution pacts with two SZA subsidiaries, Reno NV-based Model Dairy and New England-based Garelick Farms.

“Suiza has a national infrastructure, and we have a national brand,” says Feinblum. “By working together we can accelerate Horizon’s growth in processing and distribution.”

According to Amy Barr, director of communications for Horizon, SZA’s stake in Horizon does not put the conventional dairy company in a position to take over the organic dairy products maker. “There are enough individual shareholders to prevent that,” she says. In addition, Horizon has a corporate stand-still provision that prevents any large stockholder from attempting a takeover without the agreement of Horizon’s board of directors, she says.

SZA posted 1Q98 sales of $593.1 million, up 62.2% from 1Q97. Horizon posted 1997 sales of about $30 million and expects revenues of about $50 million in 1998. HCOW has 9.16 million shares of stock outstanding, giving it a market capitalization of approximately $138 million.