Jan. 2 (Bloomberg) -- Royal Bank of Canada took the top spot for arranging stock sales in Canada last year, displacing Toronto-Dominion Bank in the slowest year for equity financings since 2008.
Royal Bank’s RBC Capital Markets unit arranged $5.63 billion in 68 equity financings, including Hudson’s Bay Co.’s initial public offering, according to data compiled by Bloomberg. Bank of Montreal’s BMO Capital Markets unit rose to second, with 46 sales that raised $4.87 billion, while Toronto-Dominion’s TD Securities unit slipped to third.
“Last year -- excluding 2008 -- was one of the weakest we’ve seen over the last seven years,” Peter Miller, head of equity capital markets in Canada for BMO Capital Markets, said in an interview in Toronto. “All the uncertainty that’s around Europe and then China last year, with the commodity prices, have challenged the market.”
Canadian equity financings this year will be fueled by investor appetite for dividend-paying stocks and high-yield real estate investment trusts as low interest rates drive demand for higher returns, according to investment bankers.
“The same themes that played out last year are probably going to continue in 2013, with the demand coming from both retail investors and institutions,” Sante Corona, head of equity capital markets at TD Securities, said in an interview from Toronto. “That manifests itself in demand for dividend-paying common shares, REITs, preferred shares and convertible debentures. I don’t think that’s going to change.”
The Standard & Poor’s/TSX Composite Index, Canada’s benchmark stock gauge, rose 4 percent last year, trailing every developed stock market except Portugal and Spain. The Canadian economy will slow to a 1.8 percent rate of growth in 2013, from 2 percent last year and 2.6 percent in 2011, according to the median estimate of 29 analysts surveyed by Bloomberg. That would be the slowest annual pace since the recession of 2009 and below economists’ estimates for 2 percent growth in the U.S. in 2013.
Royal Bank shares rose 1.1 percent to C$60.50 at 10:07 a.m. in Toronto, Bank of Montreal gained 0.5 percent to C$61.17 while Toronto-Dominion increased 0.5 percent to C$83.41.
Companies raised $29.3 billion in Canada from IPOs, secondary sales and convertible debentures in 2012, down 7.3 percent from the $31.6 billion raised in 2011, Bloomberg data show. Last year was the slowest since 2008, when companies raised $19 billion.
Canadian Imperial Bank of Commerce ranked fourth for equity financings, followed by Bank of Nova Scotia, both unchanged from 2011.
The figures and rankings, which exclude preferred share sales and self-led deals, are current as of Dec. 31 and are subject to change as more transactions are recorded.
RBC Capital Markets was also the No. 1 arranger for IPOs and oversaw the highest number of equity financings after Canaccord Financial Inc.’s Canaccord Genuity unit, which arranged 86 sales in the year.
“The results, in terms of not only total dollar value but also number of book-run transactions, reflect our strategy,” Kirby Gavelin, RBC’s head of equity capital markets in Canada, said in an interview in Toronto. “We are focused on a broad range of sectors in Canada and both larger and smaller capitalization issuers in those sectors.”
Calgary-based companies dominated the 10 biggest transactions last year, with secondary stock sales from firms including Gibson Energy Inc., MEG Energy Corp. and AltaGas Ltd. Crescent Point Energy Corp., the most acquisitive Canadian energy company this year by number of deals, raised the most, with about C$2 billion ($2 billion) in three stock sales.
A slump among Canadian IPOs continued. Companies raised $2.63 billion in initial public offerings, down 15 percent from 2011 and the slowest year since 2009, according to Bloomberg data.
Hudson’s Bay’s C$365 million sale in November was the largest Canadian-listed IPO, followed by the C$300.8 million offering for Vancouver-based miner Ivanplats Ltd., Bloomberg data show. Sunshine Oilsands Ltd., based in Calgary, raised HK$4.5 billion ($580 million) its IPO in February, though it chose to list in Hong Kong instead of Canada. Sunshine pursued a secondary listing in Toronto and shares began trading on Nov. 16.
Some IPOs, including Crius Energy Trust and Hudson’s Bay, had to be scaled back, while others including Gateway Casinos & Entertainment Ltd., Meranex Energy Trust and Agellan Commercial Real Estate Investment Trust were pulled or postponed.
“The IPO market has been one that’s required work,” said RBC’s Gavelin. “You’ve got investors who are very focused on value and, as a result, are certainly prepared to reflect their views on what an appropriate price is.”
HealthLease Properties REIT was the best performing among Canadian IPOs that raised at least $100 million in the year, returning 11 percent since its initial sale in June, according to Bloomberg data. Dundee Industrial REIT was the second-best, with a 10 percent return since its August IPO. Among the worst performers, Regal Lifestyle Communities declined 8.5 percent since its October offering while Argent Energy Trust fell 7.3 percent since its initial sale in August.
Canadian REITs raised almost $500 million in seven IPOs in 2012, more than any other industry in Canada, Bloomberg data show.
“There’s been a very large backlog of IPOs building up amongst a variety of industries,” BMO’s Miller said. “A lot of it is yield oriented. We hear there’s a lot of REITs in the pipeline.”
Loblaw Cos., Canada’s largest grocery chain, plans to create a REIT and sell units in an IPO in mid 2013, the Brampton, Ontario-based company said Dec. 6. Loblaw said it will contribute about 35 million square feet of real estate with a current value of more than C$7 billion, and intends to retain a “significant” majority interest.
Hudson’s Bay Chief Executive Officer Richard Baker said the Toronto-based retailer may consider something similar for its 11 million square feet of real estate.
“We’ve always believed that sometime in the future we could have the opportunity to create a REIT similar to what Loblaw’s is proposing,” Baker said on a Dec. 11 conference call with analysts.
To contact the reporter on this story: Doug Alexander in Toronto at firstname.lastname@example.org