Why Bain hired David Brandon to perform Toys R Us: Bigger a prosperous IPO history

Why did Boston-based leveraged-buyout specialists Bain Capital hire David Brandon to helm Toys r us?

Easy: He’s made them a king's ransom prior to now, and likely will do it again.

Before his five years as athletics director with the University of Michigan ended ignominiously along with his resignation last fall, Dave Brandon spent 1999-2010 as CEO of Ann Arbor-based Domino’s Pizza Inc.

Bain had paid Domino’s founder Tom Monaghan $1.1 billion in September 1998 to the company, and yes it hired Chicago-based corporate headhunters Heidrick & Struggles Inc. to uncover an executive to jog the pizza chain.

The hunt designed Brandon, who had been running Livonia-based direct-mail giant Valassis Communications Inc. since 1989.

His time at Valassis included the firm’s 1992 initial public offering - something of curiosity to Bain because its core business technique are buying companies after which it later selling them for a lot more income.

Brandon led Valassis’ March 1992 IPO that raised nearly $376 million by selling 22.1 million shares of stock at $17 per share.

This company had been bought in 1986 for almost $400 million by Australia’s Consolidated Press Holdings Ltd., and it also kept 49 percent of Valassis’ shares at the time of the IPO. It sold its remaining stake in 1997.

(In 2014, San Antonio-based Harland Clarke Holdings Corp. bought Valassis for $1.84 billion and took it private. Valassis shares were trading at $34 when the company was de-listed.)

At Domino’s, Brandon was given the job of doing something similar.

The pizza giant - it can be second in space just to Pizza Hut - went public at $14 a share, which raised about $337 million in 2004 within the sale of 24.One million shares. The IPO was handled by JP Morgan and Citigroup.

The $14 initial price was below analyst expectations, which in fact had the IPO price at $15 to $17 per share. It dropped under $14 in first-day trading, but Brandon noted during the time it had become the largest restaurant industry IPO ever.

Any disappointment with the IPO price has for many years evaporated: Domino’s shares (NYSE: DPZ) today are trading at in excess of $109. That’s a 678 percent rate of increase through the $14 IPO stock price.

Domino's today includes a $6 billion market cap.

Not a bad revenue, but Bain missed a piece of computer because doing so sold off its remaining 15 % stake last year.

Still, Bain and other investors took an $897 million Domino's dividend in 2007. Not very shabby, although an origin of political criticism of Bain when its founder, Mitt Romney, was running for president this year.

Domino’s reported $162.6 million in net profit on revenue of $1.4 billion last year. It has $1.5 billion in long-term debt stemming from a few recapitalizations, which its executives and industry sources say was not a difficulty for your pizza company.

With all the toy giant, Toys R Us is predicted to quarterback its long-expected IPO.

In the interview together with the Wall Street Journal , he acknowledged that going public was likely, but is not immediate.

“The focus now's on execution, performance and growth,” he was quoted saying. “If we stay focused, the ownership situation will resolve itself.”

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