DAVIDsTEA Pursues IPO

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DAVIDsTEA is exploring an initial public offering (IPO). LOGO-DavidsTeaThe privately held company, based in Montreal, Quebec, operates 120 specialty tea stores including 20 in the U.S. and 100 in Canada. Four A-list banks were named in the lead role of initiating the IPO. These include Goldman Sachs Group, Inc., JP Morgan, Chase & Co. and Bank of America. The stock offering is expected later this year. As the IPO nears, filings will reveal a great deal about operations including revenue and staffing at the company which is the second largest tea shop retailer in North America. The company was launched in 2008 by David Segal with financing from his cousin Hershel Segal, founder of the Le Chateau clothing chain. The initial Queen Street location in Toronto and later mall openings were a great success generating between $1 and $2 million annually per location. The funds fueled a countrywide expansion at a time when its primary competitor was Teaopia, a 47-store chain based near Toronto. Atlanta, Georgia-based Teavana in 2012 acquired Teaopia, rebranding the stores Teavana and going head-to-head with DAVIDsTEA in 40 Canadian malls. Teavana, by then operating 320 stores, was acquired by Starbucks in November 2012. The coffee company paid $1.94 million per store in the $620 million acquisition. Teavana’s operating income was $31.6 million in 2011.
New DAVIDsTEA store in Quebec City's Fleur de Lys Centre Commercial (Photo: DAVIDsTEA)
New DAVIDsTEA store in Quebec City's Fleur de Lys Centre Commercial (Photo: DAVIDsTEA)
DAVIDsTEA subsequently sought a $14 million (CAD) cash investment by the Highland Consumer Fund in April 2012 which was used to increase the company’s holdings from 75 to more than 100 stores. DAVIDsTEA subsequently opened a U.S. office and in June 2014 Sylvain Toutant was named president and CEO. Toutant was former president of coffee distributor Keurig Canada and headed Keurig Green Mountain’s U.K. operations. He was CEO at coffee distributor Van Houtte when Keurig acquired that company. David Segal is now head of marketing, merchandising and procurement. DAVIDsTEA sells most of its 150 selection of loose leaf tea in mall shops but also operates street front locations with a larger footprint in Chicago, New York, Philadelphia, New Jersey and San Francisco. Teavana’s newly issued stock experienced a steep increase in the first few weeks following its listing on the New York Stock exchange in July 2011. It was initially priced at $17 per share rising 64% the first day but later falling to around $25 per share. Starbucks paid $15.50 per share in 2012, a 40% discount from the IPO. Teavana currently operates more than 365 stores in the Canada, the U.S. and Mexico including showcase locations in New York City, Beverly Hills and Chicago. Sources: Teavana, Starbucks, Seeking Alpha, DAVIDsTEA, Highland Consumer Fund and Reuters