Canadian pensions are underinvested in the country’s public markets, starving domestic companies of capital and exposing them to foreign takeovers, says the head of capital markets at Desjardins Group.
That lack of investment “sucks a lot of liquidity out of the market, which has an impact on valuations and your ability to grow and thrive as a public company,” said François Carrier in an interview with Bloomberg News.
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The country’s largest pension manager, Canada Pension Plan Investment Board, had 12 per cent of its capital invested in domestic assets as of March, compared with 70 per cent in 2001, when the board was a relatively new entity and Canada had rules that capped pension funds’ investments in foreign assets. Just eight per cent of CPPIB’s active equities portfolio was in Canadian stocks as of March 31.
Japan’s Government Pension Investment Fund allocates nearly a quarter of its portfolio to Japanese equities. Japan makes up 5.1 per cent of global equity market capitalization and Canada 2.6 per cent, according to data compiled by Bloomberg.
Carrier isn’t the only one who sees a problem. In March, more than 90 business leaders signed an open letter to Finance Minister Chrystia Freeland and her provincial counterparts, urging them to change the rules for pension funds to “encourage them to invest in Canada.”
At Freeland’s request, former Bank of Canada Governor Stephen Poloz is now looking at ways to entice pension managers to do exactly that.
So far, Poloz has heard solutions such as changing regulations to allow the pensions to play a more activist role in the companies they invest in, or creating a pooled fund that would make dealmaking easier for smaller pension plans.
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Several Canadian mid-caps have been swallowed up by foreign buyers this year, including steelmaker Stelco Holdings Inc., which was bought by Cleveland-Cliffs Inc., and residential property owner Tricon Residential Inc., which was acquired by Blackstone Inc.
For Carrier, conversations around go-private transactions are “always a little bit depressing,” because he believes privatization portends a lack of participants in the public market. When Canadian companies can’t access the right kind of capital and can’t achieve proper valuations, Carrier said, the door opens to aggressive acquisition offers, often from foreign companies.
The Canadian initial public offering market has been sluggish, with less than $750 million raised this year, largely for financial vehicles such as ETFs, data compiled by Bloomberg show.
Desjardins is ramping up debt markets activity for corporations, expanding beyond its traditional area of government debt. Carrier believes raising more capital “translates into better valuation, which makes for a more competitive stance on the M&A front, which then allows our Canadian issuers to thrive on global markets.”
The tone of M&A conversations is more constructive now than in the past year, Carrier said.
Apparel retailer Groupe Dynamite Inc. is in the process of listing on the Toronto Stock Exchange, while drugmaker Apotex Inc. is planning an IPO next year, Bloomberg reported.
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“You’ve got to remain open to the possibility that some foreign companies are going to buy Canadian companies,” Carrier said. “I just hate the fact that we’re making it so easy.”
With assistance from Layan Odeh
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The TSX hasn’t seen a corporate IPO since Lithium Royalty raised $150 million in February 2023
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Published Nov 14, 2024 • Last updated 15 hours ago • 2 minute read
Groupe Dynamite Inc. is poised to awaken Canada’s long-dormant initial public offering market after an 18-month dry spell, in what bankers are calling a cunningly timed offering that is expected to be the country’s biggest debut in nearly three years.
Dynamite, a retailer of women’s clothing, aims to raise $300 million in a deal that would value the company — majority owned by chief executive Andrew Lutfy — at $2.3 billion.
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Its IPO would be the largest in Canada since Bausch + Lomb Corp. raised $889.3 million in January 2022. It’s expected to help the Toronto Stock Exchange, which hasn’t seen a corporate IPO since Lithium Royalty Corp. raised $150 million in February 2023.
“The timing of this IPO is actually quite canny,” said Grant Kernaghan, the chief executive of Citigroup Inc.’s global markets business in Canada.
Because other companies pushed through their IPOs ahead of the U.S. presidential election — on the prediction that there would be uncertainty about the results, which turned out to be incorrect — an air pocket of sorts has developed in which Dynamite isn’t facing competition for investor dollars.
“What you’ve got here is a very smart decision to try and hit the market in a very narrow period, when there’s unlikely to be a lot of competition out of the U.S. and that might lead to some incremental demand,” Kernaghan said in a phone interview.
That will help Groupe Dynamite, which is offering subordinate shares, to break the ice after “a very thin period for IPOs over the last couple of years,” he added.
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Indeed, investors are watching the deal closely and more potential IPO candidates are waiting in the wings. Bloomberg reported that generic drug maker Apotex Inc. has hired bankers in preparation for an IPO. Bankers anticipate more action in 2025.
“I would expect there’ll be more deals,” said Daniel Nowlan, vice chairman and managing director of equity capital markets, corporate and investment banking at National Bank of Canada. “A lot of people are looking at this Dynamite deal to see how it goes.”
Investors have been asking to see “large, liquid names” coming to the market after a long stretch between IPOs in Canada, he said by phone. However, he does not expect any of those transactions to show up by the end of the year, due to holidays including Thanksgiving and Christmas.
“It’s just tough to squeeze things in,” he said.
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A potential return for IPOs in Canada follows an uptick in secondary stock issuances this year. Through the end of October, Toronto Stock Exchange-listed firms raised $14.1 billion, up 9.4 per cent from $12.9 billion through the same period in 2023, almost entirely due to a rebound in secondaries and launches of exchange traded funds.
With assistance from Bailey Lipschultz
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Deal would cement its top executive as a billionaire
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Published Nov 11, 2024 • Last updated 5 hours ago • 2 minute read
Canadian women’s clothing retailer Groupe Dynamite Inc. launched its initial public offering with a dual-class share structure and a valuation of $2.3 billion, a deal that would cement its top executive as a billionaire.
The company behind the Garage and Dynamite chains said in public filings that Andrew Lutfy, its owner and chief executive officer, expects to offer subordinate voting shares in the range of $19 to $23 per share, which would raise about $300 million based on the midpoint.
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Lutfy would retain about 87 per cent of the company and 98.5 per cent of the voting rights, assuming the underwriters don’t exercise an option to sell more shares. If the IPO goes at $21, the company’s market capitalization would be $2.3 billion, making Lutfy’s stake worth $2 billion.
The company will list on the Toronto Stock Exchange and trade under the symbol GRGD. The offering is being led by Goldman Sachs Canada Inc., BMO Nesbitt Burns Inc., RBC Dominion Securities Inc. and TD Securities Inc., with other institutions including Scotia Capital Inc. and Desjardins Securities Inc. as part of the underwriting group.
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Groupe Dynamite, which has about 6,000 employees, operates nearly 300 stores in U.S. and Canada selling fashion-forward clothing that’s marketed using bold, youthful imagery.
The company had revenue of $888 million and net income of $128 million during the 12-month period ending Aug. 3, and reported a total debt of $469 million, according to the IPO filings.
Lutfy managed to quickly boost Groupe Dynamite’s revenue after restructuring its real estate leases while the company was under creditor protection during the COVID pandemic.
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The 60-year-old Montreal businessman, who started as a part-time Garage stockroom clerk at the age of 18, is also the chief executive of Carbonleo, a real estate developer that recently built the Royalmount, a massive luxury mall in Montreal. The project was halted for many months during the pandemic and cost about $1.5 billion, according to Montreal news outlet La Presse.
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He’s also the grandson of Joseph Chamandy, the founder of the clothing manufacturer known today as Gildan Activewear Inc.
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(Bloomberg) — Canadian women’s clothing retailer Groupe Dynamite Inc. launched its initial public offering with a dual-class share structure and a valuation of C$2.3 billion ($1.7 billion), a deal that would cement its top executive as a billionaire.
The company behind the Garage and Dynamite chains said in public filings that Andrew Lutfy, its owner and chief executive officer, expects to offer subordinate voting shares in the range of C$19 to C$23 per share, which would raise about C$300 million based on the midpoint.
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Lutfy would retain about 87% of the company and 98.5% of the voting rights, assuming the underwriters don’t exercise an option to sell more shares. If the IPO goes at C$21, the company’s market capitalization would be C$2.3 billion, making Lutfy’s stake worth C$2 billion.
The company will list on the Toronto Stock Exchange and trade under the symbol GRGD. The offering is being led by Goldman Sachs Canada Inc., BMO Nesbitt Burns Inc., RBC Dominion Securities Inc. and TD Securities Inc., with other institutions including Scotia Capital Inc. and Desjardins Securities Inc. as part of the underwriting group.
Groupe Dynamite, which has about 6,000 employees, operates nearly 300 stores in US and Canada selling fashion-forward clothing that’s marketed using bold, youthful imagery.
The company had revenue of C$888 million and net income of C$128 million during the 12-month period ending Aug. 3, and reported a total debt of C$469 million, according to the IPO filings.
Lutfy managed to quickly boost Groupe Dynamite’s revenue after restructuring its real estate leases while the company was under creditor protection during the Covid pandemic.
The 60-year-old Montreal businessman, who started as a part-time Garage stockroom clerk at the age of 18, is also the CEO of Carbonleo, a real estate developer that recently built the Royalmount, a massive luxury mall in Montreal. The project was halted for many months during the pandemic and cost about C$1.5 billion, according to Montreal news outlet La Presse.
He’s also the grandson of Joseph Chamandy, the founder of the clothing manufacturer known today as Gildan Activewear Inc.
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(Bloomberg) — Shares of Canadian payment company Lightspeed Commerce Inc. rose as much as 13% Thursday after it reported a better outlook amid a strategic review that could lead to a sale.
“Since I came back to Lightspeed, we’ve been just looking at operations, simplifying operations across the business, looking for efficiencies,” said the founder and Chief Executive Officer Dax Dasilva in an interview.
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Dasilva was reappointed as CEO in February, replacing JP Chauvet and promising to prioritize profitability. He later said that going private, as fellow Quebec technology firm Nuvei Corp. announced it would, could be an option.
In September, the Montreal-based maker of point-of-sale software for retailers and restaurants confirmed it was conducting a strategic review of its operations. JPMorgan Chase & Co. and Royal Bank of Canada were hired to help with the process, according to a person familiar with the matter.
“I just want to make sure that everybody’s super clear that we don’t have a presupposed outcome for that,” Dasilva said. “All options are very much on the table, and that ranges from remaining a standalone public company to the alternatives that we’re exploring as a part of the review process.”
Lightspeed reported revenues of $277 million in its second fiscal quarter, ended Sept. 30, slightly beating estimates. Revenues rose above $1 billion on a 12-month trailing basis for the first time in the firm’s almost 20-year history.
The company raised its outlook for earnings before interest, taxes, depreciation and amortization in fiscal year 2025 to $50 million from $45 million, but is not yet profitable. Lightspeed said it will postpone an investor day conference scheduled this month due to the strategic review.
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Lightspeed went public in 2019 on the Toronto Stock Exchange. Its stock price reached an all-time high of almost C$160 in September 2021, but never recovered from the tech market slump. Shares rose 6.8% to C$23.42 at 2:28 p.m. in Toronto, giving the company a C$3.56 billion ($2.57 billion) market capitalization.
Dasilva said the strategic review was triggered by “acting in the best interests of the company and its stakeholders.”
“We continue to believe that the stock could be worth considerably more on a takeout,” Bank of Montreal analyst Thanos Moschopoulos wrote in a note to clients.
Meanwhile, Lightspeed wants to focus its marketing strategy and grow outbound sales in its North American retail and European hospitality businesses.
“We can continue to get more efficiency as we reallocate resources,” Dasilva said. “We’re also looking at contracts, facilities, et cetera.”
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