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Posted AT 4:43 PM EDT ON 24/03/06

Tims holds gains

Globe and Mail Update

Investor appetite for Canadian coffee and doughnut icon Tim Hortons Inc. surpassed already lofty expectations Friday, with the shares jumping about 30 per cent on its first day of trading.

The stock rose as high as $37.99, and closed at $33.10, with more than 17.5 million shares changing hands. The initial offering price was set last night at $27.

The stock began trading on the New York Stock Exchange and the Toronto Stock Exchange under the symbol THI in the largest North American initial public offering in more than half a year. The company's market capitalization is now valued at about $6.6-billion.

The stock market debut caps months of buzz about one of Canada's most beloved brands. The chain, famous for its Timbits and coffee, was founded by National Hockey League legend Tim Horton and Ron Joyce in 1964 and is the largest quick-service restaurant chain in Canada.

"It's a great milestone in the history of our great company," president and chief executive Paul House told ROB-TV on Friday.

The company opened its first store in Hamilton, Ontario in 1964. In February, 1974, Mr. Horton died in a car accident, leaving Ron Joyce to run the company. It was bought by Wendy's International Inc. in 1995 and now has more than 2,600 stores in Canada.

Mr. House said he expects there to be more growth in Canada than the U.S., particularly in Quebec, Western Canada and Toronto. "We're far from being saturated at this time."

The company said late Thursday it raised about $785-million and repeated a plan to fully separate from its corporate parent, Wendy's, by the end of the year. After Friday's offering, Wendy's will still own about 83 per cent of Tims.

The company sold 29 million shares at $27 per share, with about 60 per cent of the entire IPO awarded to Canadian investors.

Availability for individual investors in Canada will be scant, however. Investment bankers have set aside just 14 per cent of the offer for Canadian retail investors, the same group whose unswerving loyalty to the coffee chain has made it one of the hottest deals this country has seen since the dot-com boom, the Globe and Mail reported Friday.

Most of the money raised will be used to pay off debt that Tim Hortons owes Wendy's.

Wendy's agreed last summer to spin off Tim Hortons after a major Wendy's shareholder, investment firm Pershing Square Capital Management LP, pressured the company to alter its strategy to boost shareholder value. Wendy's has denied that pressure was the reason for the change.

Tim Hortons has made steady sales gains during a sluggish year for Wendy's, the nation's third-largest burger chain. Tim Hortons recorded revenue of $1.2-billion (U.S.) last year, according to Wendy's latest earnings report.

Tims has 291 stores in the United States, mostly in Ohio, Michigan, New York, Rhode Island and Connecticut, and is planning to nearly increase that to 500 by the end of 2008. Mr. House said today the company intends to be a regional player in the U.S., rather than a national player.

Still, "it took us 41 years to build the brand in Canada and we realize it's a long-term business plan to expand in the U.S.," Mr. House said. "It will take a period of time before the brand will be anywhere where it is (in Canada), if it ever gets there."

The offering is being underwritten by Goldman Sachs, RBC Capital Markets Corp., JPMorgan Chase and Scotia Capital.

Tim Hortons is one of several restaurant chains that has sold or plans to sell shares to the public.

In a January offering of Chipotle Mexican Grill, owned by McDonald's Corp., the price of nearly 7.9 million shares doubled in their first day of trading to close at $44.

Morton's Restaurant Group Inc., operator of the high-end steakhouse chain, went public in February, and Burger King Holdings Inc. is planning an IPO for the No. 2 U.S. hamburger chain.

Wendy's shares fell $2.02 to $62.99 in New York.

With files from Globe reporter Sinclair Stewart and the Associated Press.

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