Stock sales in Canada may eclipse the $40.6 billion reached in 2010 as demand for capital spreads beyond the resource sector, said Philip Smith, Scotia Capital’s deputy head of global investment banking.
“This year promises to be above average, just based on the first quarter,” Smith said in an interview. “I think you’ll see much more activity in technology, media, telecom, consumer products and industrial products.”
The unit of Bank of Nova Scotia leads Canadian equity, equity-linked and preferred sales this year, the first time it’s led the ranking since the third quarter of 2009, according to data compiled by Bloomberg. The Toronto-based lender has advised on 25 deals worth $1.41 billion, including sales by Brookfield Asset Management Inc., Bell Aliant Corp. and Manulife Financial Corp.
“Finally you’re starting to see it’s a broad enough market that has real depth to it,” said Smith, 44. “Even though oil and gas and mining will be pretty strong, I don’t think they’re going to be as dominant going forward as they have been in the past two years.”
Canadian companies have raised $10.3 billion in 246 initial public offerings and secondary sales this year.
IPOs may also rebound after “climbing out of the chasm that was 2008,” Smith said. “Our IPO pipeline is pretty good; there are potentially a couple of very large IPOs in the back half of the year.”
There have been 31 IPOs in Canada this year worth $110 million, a plunge from 36 deals worth $1.85 billion in the year-earlier quarter, according to Bloomberg data.
Smith credited the 2008 hiring of Patrick Burke as head of institutional equity sales and the promotion of John Henderson as head of research for part of the bank’s recent success with stock sales and mergers. The investment bank has also increased research on foreign companies, adding 100 firms in Mexico, Peru, Colombia, the U.S. and elsewhere, in industries such as insurance and energy, over the past two years.
“It’s time for us to look outside of Canada,” said Smith, whose team travels to Latin America every two weeks. “I expect that’s going to continue, but it’s going to be very sector-specific, where we see something that ties into our overall platform and also complements what our investing clients want.”
Smith, who also serves as chairman of the Investment Industry Association of Canada, was among the presenters before a Parliamentary committee on March 9 concerned about the proposed sale of TMX Group Inc. to London Stock Exchange Group Plc. While Scotiabank is one of the only Canadian banks that hasn’t voiced an opinion on the proposed transaction, Smith said IIAC members are “divided” on the deal.
The Canadian government, which will review the TMX transaction to see whether it will be of “net benefit” to Canada, may ask the companies to make changes to the transaction to guarantee that TMX-listed companies don’t become disadvantaged, Smith said.
“It suggests to me there’s enough political interest in it that they’ll come back looking for some changes,” Smith said. “They’ll throw it back to the (Toronto Stock Exchange) and LSE saying ‘come back with another deal.’”
Bank of Nova Scotia is Canada’s third-largest bank by assets.