Agricultural Seed Firm Seminis Is Seeking to Reap Capital With IPO
With less-than-stellar performance recently by several first-time stock offerings from Internet firms, bankers are betting this week could be a good time to debut a deal by the world’s largest producer of fruit and vegetable seeds.
Seminis Inc., the Saticoy-based agricultural concern, is expected to sell a $215-million initial public offering, or IPO, through co-lead managers Goldman, Sachs & Co. and J.P. Morgan & Co. this week at $20 to $23 a share, bankers said.
The company markets its seeds in more than 120 countries under the brand names Asgrow, Petoseed and Royal Sluis of the Netherlands, along with nine regional specialty brands. It produces more than 8,000 products covering most varieties of fruits and vegetables. In fiscal 1998, the company had about $384 million in net seed sales, about a 19% share of the estimated $2-billion market for fruit and vegetable seeds.
Seminis is a subsidiary of Savia of Monterrey, Mexico, which will still hold 67.4% of the firm’s outstanding stock after the offering.
Seminis develops seeds designed to “reduce the need for chemicals, increase crop yield, offer longer shelf life and create tastier foods,” according to the firm’s IPO filing with the Securities and Exchange Commission.
“By using fruit and vegetable seeds that resist diseases and insects, growers will increase their yield and save significant costs by reducing pesticide use,” the filing said.
The company, formed in 1994 in a bid to consolidate the highly fragmented fruit and vegetable seed business, started with the acquisition of the 143-year-old Asgrow seed business from Upjohn Co. The company later acquired 49-year-old Petoseed and Royal Sluis, a 172-year-old firm.
Seminis, with 3,000 employees, recently made acquisitions in South Korea, Brazil and South America.
“We have a problem with this--because it’s a real company. The fundamentals look very strong. It has a huge amount of revenues, but I don’t know it has enough sex appeal for the market to come after it,” said David Menlow, president of IPO Financial Network, a New Jersey research firm. “It’s a good company from a good underwriter, but in this market with its emphasis on the Internet, it will be difficult.”
In fiscal 1998 ended Sept. 30, the company saw net sales increase 12.9% to $428 million and net income decrease to $6.8 million, from $11.3 million in fiscal 1997, mostly due to acquisitions, the IPO filing said.
Although giants like Seminis use heavyweight firms to raise capital, many small businesses in Southern California are turning to Beverly Hills investment advisor West Coast Capital. The firm advises businesses looking to raise $5 million to $20 million in start-up financing.
The boutique firm provides a link between folks with money to invest and entrepreneurs who can be clueless when it comes to raising capital.
“I want us to be known as the money-raising source,” said President Lorne Goldberg, 30.
With only three people, West Coast is developing an impressive deal list, advising such local firms as:
* Los Angeles-based restaurant chain Rosti on a $4.1-million equity deal.
* Los Angeles-based grocery delivery firm Pink Dot on a $3.1-million equity deal.
* Publicly traded YouBet.com, a Los Angeles-based interactive online horse racing service, on a $6.5-million private financing.
* Thrifty Lavanderia, a Los Angeles-based chain of coin-operated laundries, on an $18-million debt and equity deal.
“We like pedestrian-type businesses, those with cash flow and predictability. That’s not to say we’re not interested in the Internet space, but cash flow is king,” said Goldberg, who founded the company in late 1995.
Goldberg, with a background in the real estate investment business, saw an opportunity to serve a growing, underserved market for small and mid-sized firms and decided to start his own company. Goldberg’s firm has added an office in New York, and he recently hired two investment advisors, both under age 31.
Although relatively unknown, the niche firm increasingly helps broker financings with venture capitalists and such Los Angeles equity funds as Riordan, Lewis & Haden.
“He’s a bulldog for the entrepreneur,” said Jim Armstrong, a venture capitalist with Idealab Capital Partners, a venture firm in Pasadena. While at Austin Ventures in Texas, Armstrong worked with Goldberg on a deal.
“He’ll handle all the meetings, all that stuff. He can get the venture capitalists on the phone. He gets good meetings with top people.”
Recently, West Coast Capital has partnered with John Kaufman, formerly in charge of operations for Koo Koo Roo, to acquire the franchising rights for San Francisco-based Baja Fresh restaurants.
West Coast Capital also sees opportunity in Salt Creek Grille, a growing chain of Southern California restaurants, led by former managers of the Islands Restaurant chain. West Coast said it is about to complete a private financing of an undisclosed amount for the chain, which has a flagship restaurant in Dana Point.
Initial public offerings are highly speculative and unsuitable for many investors. Debora Vrana covers investment banking and the securities industry for The Times. She can be reached at debora.vrana@latimes.com or by mail at Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.
