Papa Murphy's Reportedly Planning For IPO


We wondered recently whether the successful debuts of Chuy’s, and now Noodles, would prompt other growth restaurant chains to seek a public offering. Now, apparently, we’re getting our answer: Vancouver, Washington-based Papa Murphy’s is preparing for an IPO, according to a report this morning by Reuters.

Papa Murphy’s going public makes all kinds of sense. Three years ago, the chain was widely considered to be an IPO candidate, but was instead snapped up by Lee Equity Partners.

Since then, the stock market has flourished, and demand for high-growth companies on Wall Street has yielded some outsized valuations. Last year, Chuy’s went public when the IPO market was tough, had a good first day and then proceeded to more than triple in value over the following year before coming back down.

Last month, Noodles went public, rose 104 percent on its first day, and is trading at about 140 percent above its offering price. Both Noodles and Chuy’s are getting stunning valuations on the public markets that private equity groups can’t hope to match.

We’d been hearing Papa Murphy’s name among IPO candidates, to the point where the chain topped our list of next possible growth chains to go public. The company is in growth mode. It serves a popular, profitable product, and its unique business model straddles the line between retail and restaurant. Lee, three years into its investment, could set the stage for a typical private equity exit with an IPO now.

Lee paid about $180 million for a valuation reportedly about 9 to 10x EBITDA, a high price just one year removed from a brutal recession. Three years later, that price is looking like a bargain.

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