Regal Lifestyle Communities Inc. and Ivanplats Ltd. are among companies driving what’s expected to be the biggest month for Canadian initial public offerings in almost two years.
Companies plan to raise at least C$725 million ($738 million) through IPOs in October, which would be the highest monthly tally since November 2010, according to data compiled by Bloomberg.
Real-estate investment trusts and income trusts offering high dividends are driving Canada’s new issuance market, bucking a global IPO market slump that’s expected to extend into 2013 amid signs of slowing global growth.
“The overriding theme is the demand for yield, which continues,” said Sante Corona, head of equity capital markets at Toronto-based TD Securities, a unit of Toronto-Dominion Bank. “There are REITs, energy trusts and mining companies coming to market; it’s a confluence of circumstances that they will be in the market together in October.”
The biggest Canadian-listed IPOs this year have been dividend payers such as Argent Energy Trust, HealthLease Properties Real Estate Investment Trust, and Dundee Industrial REIT, which is expected to start trading this week after raising C$155 million on Sept. 26. That trend continues through October, as Canadian investment banks bring more IPOs to the market to meet demand.
“Say what you will about investment bankers, but if people want to buy boots they’re not going to sell them shoes,” said Les Stelmach, who helps manage C$900 million of high dividend securities for Bissett Investment Management in Calgary.
Regal Lifestyle plans to sell 13.9 million shares for C$10 each in its C$139 million IPO as soon as Oct. 5, according to documents. The company, which will trade in Toronto under the symbol RLC and offer a yield of 7 percent, plans to use its proceeds to buy 10 retirement communities across the country.
Meranex Energy Trust and Crius Energy Trust, which are using a corporate structure based on Canada’s once popular income trusts, plan to sell units by the end of the month offering payouts of about 10 percent to 11 percent, and 8 percent to 9 percent, respectively.
Meranex, which will invest in oil-and-gas assets in Texas, aims to raise about C$150 million, according to people familiar with the sale. Crius, which will invest in a U.S. energy retailer, seeks to raise about C$140 million, said two people, who declined to be identified because the terms aren’t public.
REITs and energy trusts have become “bright spots” in Canada’s IPO market while mining and oil-and-gas have “fallen out of favor,” according to Dean Braunsteiner, IPO services leader in Toronto for PwC Canada, a member of PricewaterhouseCoopers International Ltd. The Ivanplats IPO “could be a game changer,” he said.
“The market is waiting for that first mining IPO to go and if that happens and commodity prices stay where they are there could be some renewed interest on that front,” Braunsteiner said. “It has the potential for being a turnaround.”
Ivanplats, the mining company founded by billionaire Robert Friedland, plans to sell 60.6 million shares for C$4.50 to C$5.40 each in its IPO, to be priced Oct. 15, according to sale documents. The offering, which could be as much as C$327.2 million, would be Canada’s third-biggest mining IPO in more than a dozen years, according to Bloomberg data.
Other IPOs in the works include Potash Ridge Corp., which submitted documents to regulators on Sept. 26.
The planned IPOs total the most since November 2010 when companies including Tourmaline Oil Corp. and Whistler Blackcomb Holdings Inc. sold $960 million in initial offerings, according to Bloomberg data.
“I like to see IPOs,” said Stelmach, whose fund invested in Argent’s C$212.3 million IPO in August. “It challenges the pricing on what the products that are out there already and the good names will hold their value.”
Canadian companies have raised C$1.17 billion in IPOs in the first three quarters of the year, about half the amount raised in the same period last year and the slowest nine-month start since 2008, Bloomberg data show. Still, Canada had $319 million of IPOs in the third quarter, more than double the second quarter, Bloomberg data show.
By comparison, initial share sales worldwide raised about $24.5 billion in the three-month period, 39 percent less than the previous quarter. Global IPOs last quarter dropped to the second-lowest level since the U.S. economy ended its longest recession since the Great Depression in June 2009, Bloomberg data show.
“There’s a lot of people wanting to bring these new issues into the public marketplace, but they’ve just had to wait because of all the uncertainty,” PwC’s Braunsteiner said. “If everything lines up quite well, it will be the sign of the recovery for Canada’s IPO market.”