When dreams come true: a small P.E. firm to make $3.3 billion out of a $67 million investment in Yeti

Cortec Group is about to multiply its 4-year-old $67 million investment by almost 50 times as portable coolers producer Yeti nears its IPO this October.

Yeti Holdings filed for an IPO back in July with a "to-be-confirmed" valuation of $5 billion, $3.3 of which will go to a small private equity firm Cortec Group that bought two thirds of Yeti back in 2012. If everything goes as planned, reports the Wall Street Journal, Cortec will get one of the highest and fastest investment returns in the industry, as the company is very close to getting back 50 times its initial investment in just 4 years. The experts say that this is a very rare investment case that doesn't happen that often even in the most high-return sectors such as tech startups investments.

However, Yeti still needs to prove to the investors that it deserves its $5 billion price tag before entering the IPO in October. But investors are quite optimistic about Yeti’s IPO as the company has demonstrated triple sales growth only last year as well as very impressive sales results this year, and it seems that the company is not planning to stop. If the $5 billion valuation is confirmed, the firm would be selling for 36 times its last year's earnings before interest, taxes, depreciation and amortization that accounted for $137 million.

Cortec Group invested in Yeti when the company was struggling with expanding to a more mainstream consumer audience as the company had mostly catered to a niche audience of hunters and fishermen before. Brothers Roy and Ryan Seiders opened Yeti in Texas' Austin back in 2006 and made their name by supplying high quality portable coolers to hunters and fishermen in the region.

Yeti’s coolers are priced at about $250 per piece for affordable models together with $1,200 for more premium coolers. Even though the price might seem quite high for a cooler, the customers claim that it is more than justified by the product's quality. The company has seen an overwhelming demand for their coolers the past years as more and more customers shared their ecstatic reviews saying that Yeti's cooler manages to keep beverages cool for hours even at very high temperatures.

With a generous Cortec's investment, the company has managed to not only improve its current cooler's product line but to break off of its niche market and become mass-market popular. Since 2012, Yeti has launched several new product such as soft coolers, drinkware, grillers and other accessories. Yeti's drinkware is priced at about $30-$40 per cup and its sales currently account for more than 60% of the company's total sales, reports the WSJ. In the last 3 years, the company's sales skyrocketed going from $89.9 million in 2013 to $468.9 million last year.

According to Forbes, the company's operating income has grown from $15.2 million to almost $128 million in just 3 years, demonstrating a compound annual growth rate of 190%.

Likewise, the net sales of Yeti's coolers has jumped 89% only in the first quarter of this year whereas sales of the drinkware has soared by over 700% in the same period. The company's products has become so popular that Yeti has reported a shortage in supply as it couldn't meet the demand levels. These are all quite strong arguments to justify Yeti's ambitious $5 billion valuation prospects.

Cortec Group has won an investment "lottery" by funding Yeti back in 2012 when the company was showing only mediocre success. The Manhattan-based private equity firm has only 20 employees and is managed by 4 partners. According to the WSJ, the biggest part of Cortec's earnings from Yeti will go to Cortec's own investors and not directly to the company. Also, Cortec has already received a $312 million dividend check from Yeti this year.

But, as always, Yeti is faced with such serious challenges as continuing to innovate and bringing new advanced products to the market after its IPO. Shaking off the inevitably growing competition is yet another challenge as such brands as Igloo and Cabela's are trying to eat away Yeti's marketshare by offering similar coolers already now.

Anyway, it will be clear in a few weeks whether investors will find Yeti worth of the large $5 billion valuation that Cortec is waiting for but, in any case, this small private equity firm will make some lucrative profits in the next months.