HealthLease Properties Real Estate Investment Trust and Gateway Casinos & Entertainment Ltd. lead companies set to raise more than C$1 billion ($980 million) in initial public offerings in Canada starting next month, reversing the slowest start for stock sales in four years.
“The pipeline we’ve got now is as good as we’ve seen in years,” Daniel Nowlan, co-head of equity capital markets for CIBC World Markets in Toronto, said in an interview. “It’s an impressive, large group of deals and they’ll get quite a bit of attention.”
Canadian companies including Sunshine Oilsands Ltd. have raised $790 million in IPOs the first five months of the year, according to data compiled by Bloomberg. That’s 25 percent less than the same period a year earlier and the lowest since 2008.
Europe’s debt crisis kept companies out of the market, while falling commodity prices have also damped plans, with copper down 17 percent and crude oil down 9.8 percent in the past 12 months. The Standard & Poor’s/TSX Composite Index has fallen 16 percent in the past year, trailing the three main U.S. stock indexes.
Canada’s IPO outlook has improved as companies see investor appetite rising for new stocks, including yield-oriented offerings, and as private-equity firms look to reduce or exit their holdings in private companies.
“The pipeline is building up more with consumer, real estate and industrial companies, which would be more conducive for the current market conditions,” said Peter Miller, BMO Capital Markets head of equity capital markets in Canada. “We’re starting to see them come to market and we’re going to see more of them.”
HealthLease Properties may be first to go public next month by selling shares on the Toronto Stock Exchange. That could prompt a turnaround for a year in which the largest Canadian IPO, the $579 million sale by Calgary-based Sunshine Oilsands, wasn’t even listed in Canada. Sunshine has dropped 4.9 percent since it began trading in Hong Kong in February.
The largest Canadian-listed IPO this year was the C$82.5 million sale of Morguard North American Residential Real Estate Investment Trust, arranged by RBC Capital Markets. Morguard has risen 13 percent since the IPO. Companies including miners Intergeo MMC Ltd. and Ivanplats Ltd. are also considering sales.
HealthLease Properties plans to sell 11 million units for C$10 each next month to raise C$110 million, according to sale documents. The real estate investment trust units will offer a yield of between 8 percent and 8.5 percent. The Toronto-based REIT plans to use the proceeds to buy 15 seniors housing properties in British Columbia, Alberta and the U.S. Midwest. Canaccord Genuity and National Bank Financial lead the sale.
Gateway Casinos filed documents with regulators on May 22 for its IPO, as owners Catalyst Capital Funds and TOP V New World Holdings LLC seek to sell stakes. Gateway, based in Burnaby, B.C., operates nine casinos, two community gaming centers and bingo halls. TD Securities, BMO Nesbitt Burns, JPMorgan Securities and Scotia Capital are managing the sale. A message left with Gateway Chief Executive Officer Lorenzo Creighton wasn’t immediately returned.
Pure Multi-Family REIT LP also filed documents with regulators this month for an IPO, led by Dundee Securities and Canaccord Genuity. The strategy of the Vancouver-based REIT is to invest in multi-family real estate properties in major U.S. markets, according to a May 18 prospectus.
Argent Energy plans to raise C$325 million next month to buy oil and natural gas assets in Oklahoma and Texas, according to two people familiar with the sale, who declined to be named because the details aren’t public. Scotia Capital, CIBC and RBC Capital Markets are leading the sale for the Calgary-based firm, according to a May 11 statement. Argent CEO Brian Prokop declined to comment.
Argent would be the second large energy IPO this year, following February’s sale of Sunshine Oilsands, which was managed by BOC International Holdings Ltd., Deutsche Bank AG and Morgan Stanley.
The IPOs in the works are weighted toward natural resources, BMO’s Miller said.
“It’s a challenging market for these sectors,” he said in an interview from Toronto. “Only the best will be able to access the market under current conditions.”
Intergeo, a mining company controlled by Russian billionaire Mikhail Prokhorov, filed papers with Canadian regulators on May 15 for its IPO. The company plans to sell a stake as large as 10 percent and may raise $100 million to $500 million, said a person familiar with the sale who declined to be identified because the details haven’t been made public. Morgan Stanley and BMO Capital Markets are managing the sale.
Andrey Belyak, spokesman for Prokhorov’s Onexim Group, declined to comment.
“There are a number of IPOs in the pipeline at the moment but given the erratic market activity, it’s pretty tough to price them,” said Dean Braunsteiner, IPO services leader in Toronto for PwC Canada, a member of PwC International Ltd. “The volatility at the moment is all over the place. It almost becomes impossible to come up with a realistic price.”
The projected sales may soon include Ivanplats, a mining company controlled by billionaire Robert Friedland, founder of Vancouver-based Ivanhoe Mines Ltd. Ivanplats may seek as much as $1 billion in an IPO, people with knowledge of the plan said in January. Ivanplats, which has metals deposits in South Africa and the Democratic Republic of Congo, plans to list in Toronto, according to the people, who declined to be identified because the process is private.
Ivanplats, formerly known as Ivanhoe Nickel & Platinum Ltd., is working with Morgan Stanley, Bank of Montreal and UBS AG on the potential IPO, according to one of the people with knowledge of the plan. Ivanplats declined to comment, according to a spokesman in Vancouver.
Even with these deals in the works, Braunsteiner says it’s unlikely that IPOs this year will surpass the C$2.5 billion raised in 2008.
“The uncertainty in Europe needs to get sorted out before these companies on the sidelines are really willing to get into the market,” he said.