Portillo’s Inc. Announces Pricing of Offering of Class A Common Stock in “Synthetic Secondary” Transaction
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Insights
The announcement by Portillo's Inc. regarding its public offering of 8,000,000 shares is a strategic financial move designed to restructure the company's equity without diluting current shareholders' value. The use of proceeds to engage in a 'synthetic secondary' transaction to repurchase shares of Class A common stock and cancel associated Class B common stock is a sophisticated financial engineering technique. It aims to consolidate ownership and potentially streamline the company's capital structure.
The expected gross proceeds of approximately $116 million, before expenses and underwriter discounts, indicate a significant capital infusion. However, the fact that the company will not receive any proceeds from this offering might initially seem counterintuitive. Yet, this move can be seen as a positive signal to the market, suggesting that the company is confident in its ability to generate cash flow internally to fund operations and growth initiatives. Moreover, maintaining the total common stock share count stable post-transaction indicates a neutral effect on earnings per share (EPS), which should be well-received by investors concerned about dilution.
Investors should monitor the underwriter's 30-day option to purchase additional shares, as this could indicate market demand for Portillo's stock. BofA Securities' involvement as the sole underwriter adds credibility to the offering and the non-dilutive nature of the transaction may be viewed favorably by the market.
Portillo's Inc.'s public offering and subsequent equity restructuring could reflect broader trends in the fast-casual dining sector, where companies are seeking to optimize their capital structures amid changing market conditions. The fast-casual segment faces intense competition and fluctuating consumer preferences, which necessitates agile financial strategies to support growth and innovation.
An increase in the shares of Class A common stock could enhance liquidity in the market, potentially attracting a broader investor base. Furthermore, the transaction's timing and pricing will have been carefully considered in the context of current market conditions, including investor sentiment and stock market performance. The company's decision to execute this transaction could be seen as an attempt to preemptively strengthen its financial position in anticipation of future industry challenges or opportunities.
Stakeholders should consider the potential impact of this offering on the company's governance structure. The repurchase of Class A stock and cancellation of Class B stock could alter the balance of voting power, possibly leading to changes in how the company is managed and its strategic direction.
From a legal perspective, the transaction's execution under an effective shelf registration statement indicates Portillo's Inc. has complied with the necessary regulatory requirements set forth by the SEC. This compliance ensures transparency for investors and upholds market integrity.
The synthetic secondary transaction's structure, involving the purchase and cancellation of certain shares, is legally complex and requires careful navigation of securities laws. It is designed to provide tax efficiencies and align with the company's capital raising objectives while adhering to the legal framework.
Investors should be aware that the legal intricacies of such transactions could have implications for shareholder rights and company obligations. The prospectus and other SEC filings will contain crucial information regarding the terms of the offering, the rights attached to the different classes of stock and the potential risks involved.
CHICAGO, Feb. 28, 2024 (GLOBE NEWSWIRE) -- Portillo’s Inc. (“Portillo’s” or the “Company”) (Nasdaq: PTLO), the fast-casual restaurant concept known for its menu of Chicago-style favorites, today announced the pricing of its previously announced underwritten public offering of 8,000,000 shares of Portillo’s Class A common stock (“Class A common stock”). The offering is expected to result in gross proceeds to the Company (before expenses and underwriter discounts and commissions) of approximately
The underwriter has a 30-day option to purchase up to an additional 1,200,000 shares of Class A common stock at the public offering price, less underwriting discounts and commissions.
The proposed offering is considered non-dilutive, as Portillo’s expects to use the net proceeds to (a) purchase limited liability company units of PHD Group Holdings LLC held by certain existing holders (and cancel the associated shares of the Company’s Class B common stock (the “Class B common stock”)) and (b) repurchase shares of Class A common stock from certain existing holders, each in a “synthetic secondary” transaction. As a result, Portillo’s will not receive any proceeds from this offering. Upon close of the transaction, the Company’s total common stock share count, comprised of shares of Class A and Class B common stock, will remain the same; however, the amount of shares of Class A common stock will increase by the same amount of the decrease in the number of shares of Class B common stock.
BofA Securities is acting as the sole underwriter of the offering.
The offering is being made pursuant to an effective shelf registration statement (including a prospectus) filed by Portillo’s with the Securities and Exchange Commission (“SEC”) to which this communication relates. Before you invest, you should read the prospectus in the shelf registration statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering. The offering will be made only by means of a free writing prospectus, the prospectus and the related prospectus supplement. A copy of the free writing prospectus, the prospectus and the related prospectus supplement relating to the offering may be obtained, when available, by visiting the SEC’s website at www.sec.gov. Copies of the free writing prospectus, the prospectus and the related prospectus supplement for the offering may also be obtained, when available, by contacting BofA Securities, NC1-022-02-25, 201 North Tryon Street, Charlotte, NC 28255-0001, Attn: Prospectus Department, Email: dg.prospectus_requests@bofa.com.
This press release does not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
About Portillo’s
In 1963, Dick Portillo invested
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). All statements other than statements of historical fact are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business, and are based on currently available operating, financial and competitive information which are subject to various risks and uncertainties, so you should not place undue reliance on forward-looking statements. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “commit,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “pursue,” “intend,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other similar expressions.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and our ability to maintain our lower interest expense, expand our store footprint, execute our strategy and achieve our goals, among the other risks identified in our most recent Annual Report on Form 10-K and subsequent filings with the SEC, which filings are available on the SEC’s website at www.sec.gov.
The forward-looking statements in this press release are expressly qualified in their entirety by these cautionary statements and are made only as of the date hereof. Portillo’s undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Investor Contact:
Barbara Noverini
Investors@portillos.com
Media Contact:
ICR, Inc.
PortillosPR@icrinc.com
FAQ
What was the gross proceeds expected from the public offering of Portillo’s Class A common stock?
Who is acting as the sole underwriter of the offering for Portillo’s?
Is the proposed offering considered dilutive or non-dilutive for Portillo’s?
What will Portillo’s use the net proceeds from the offering for?
