By Lisa Baertlein
LOS ANGELES (Reuters) - Investors hungry for restaurant growth gobbled up shares of Dunkin' Donuts parent Dunkin' Brands Group Inc <DNKN.O>, sending them up more than 40 percent on their first day of trading.
The stock was up 43.7 percent at $27.30 in midday Nasdaq trading on Wednesday.
The company's new market value of more than $3 billion is still significantly smaller than rivals McDonald's Corp <MCD.N> and Starbucks Corp <SBUX.O>, but the Dunkin' Donuts chain has a devoted U.S. following and plenty of room for domestic growth, particularly on the West Coast.
The chain, whose advertising slogan is "America Runs on Dunkin,'" also has opportunities to expand in international markets, where it already has 3,000 outlets.
"The market's really going to like the growth story," said Morningstar senior analyst Joscelyn MacKay. "Even though the Dunkin' Donuts brand has been around for 70 years, there's still great potential for the brand to increase its awareness around the United States."
Dunkin' Donuts sells coffee drinks, doughnuts and other foods like bagels and sandwiches. It is the primary growth engine for Dunkin' Brands, which gets 60 percent of its revenue from coffee.
Dunkin' Donuts plans to double the number of U.S. outlets from roughly 6,800 over the coming 20 years. It has most of its stores on the East Coast and sees the U.S. West, where it has just over 100 outlets, as a key growth market.
Canton, Massachusetts-based Dunkin' Brands sold $422.75 million worth of stock on Tuesday in the biggest initial public offering of the week. The IPO price of $19 a share landed above the expected range of $16 to $18.
Baskin-Robbins is Dunkin' Brands' more international brand, with just over 2,500 of its nearly 6,500 worldwide stores in the United States. The ice cream chain contributes about one-fourth of company revenue, and its closely watched sales at established restaurants have been falling for some time.
Private equity firms Bain Capital, Carlyle Group <CYL.UL> Group and Thomas H. Lee Partners bought Dunkin' Brands from global spirits company Pernod Ricard SA <PERP.PA> for $2.4 billion in 2006.
Those firms sold shares in the IPO, reducing their combined stake from 32 percent to 26 percent.
(Reporting by Lisa Baertlein, editing by Gerald E. McCormick and Lisa Von Ahn)