June 5, 2015 / 3:07 PM / 2 years ago

UPDATE 2-Shares of tea retailer DavidsTea make hot U.S. debut

(Adds CEO comments)

By Neha Dimri

June 5 (Reuters) - Shares of DavidsTea Inc, a specialty tea retailer that has grown rapidly in Canada and the United States since its founding in Montreal in 2008, rose as much as 39 percent in their U.S. debut, valuing the company at about $630 million.

The company’s IPO raised about $97 million after the stock was priced at $19 per share, above the top end of the expected price range of $17-$18.

The stock hit a high of $27.24 in early trading on the Nasdaq on Friday.

DavidsTea is the second Canadian company to list on the U.S. exchange this year. E-commerce software maker Shopify Inc listed its shares on the New York Stock Exchange and the Toronto Stock Exchange last month.

DavidsTea sells more than 150 types of tea through 161 stores in North America, with a majority of them in Canada.

DavidsTea’s most popular brews - which can be bought packaged or sipped in the store - include Buddha’s Blend, an infusion of jasmine pearls, hibiscus blossoms and green tea.

Most of its teas sell for $7.00-$9.50 for a 50g pack, but Japanese gyokuro loose leaf teas sell for as much as $19.50.

“It is interesting that millennials are talking as much about tea as they speak about coffee,” Chief Executive Sylvain Toutant told Reuters, adding that he expects growth in high single digit in the industry.

Toutant, former president of Keurig Green Mountain Inc’s Canadian unit, said the company was focused on growing organically in North America.

DavidsTea sold 2.9 million of the 5.1 million shares offered. Co-founders David and Herschel Segal, along with venture capital firm Highland Consumer Partners, sold the rest.

Herschel Segal, who also founded the Le Chateau Inc clothing chain, retains a 53.4 percent stake in DavidsTea through his Rainy Day Investments Ltd.

DavidsTea, whose main competitor is Starbucks Corp’s Teavana, has doubled its store count in four years. It expects to open about 25-30 stores in Canada and 10-15 stores in the United States in 2015.

DavidsTea reported a 31 percent rise in revenue to $141.9 million for the year ended Jan. 31. Net income was $6.4 million, compared with a loss of $6.2 million a year earlier.

Goldman Sachs, J.P. Morgan Securities and Merrill Lynch, Pierce, Fenner & Smith are among the underwriters to the IPO. (Reporting by Neha Dimri in Bengaluru; Editing by Maju Samuel)

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