A man is silloutted against signage at Porter's new check-in hall at Toronto's Billy Bishop City Airport.Kevin Van Paassen/The Globe and Mail
Porter Aviation Holdings Inc. is chopping the stock price on its $120-million initial public offering, forging ahead with the IPO despite recent equity market turmoil and tepid demand for the regional airline's shares.
Toronto-based Porter will price its stock at $5.50 next Tuesday, preparing to sell 21.82 million shares or a 35.3-per-cent stake in the company, said an industry official familiar with the IPO. There will be 61.66 million shares outstanding, assuming an "overallotment option" isn't exercised to sell a further 3.27 million shares.
Underwriters originally planned to price the offering between $6 and $7 on May 20, then delayed it again this week. The IPO is now slated to close on or about June 8, with Porter having a total stock market value of $339-million, based on $5.50 a share. The company recently had $294-million in long-term debt.
Proceeds from the IPO will go toward repaying a "non-revolving term loan" of $10.7-million, spending $11-million to complete terminal expansion at Billy Bishop Toronto City Airport and acquiring new Bombardier Q400 turboprops.
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"Revised terms are posted: Books will close Tuesday, June 1st at noon Toronto time. $5.50 per share, originally $6 to $7. Offering size remains $120-million," said a memo sent Friday to investment brokers. The Porter IPO's underwriting syndicate is led by RBC Dominion Securities Inc., which opted to price the IPO one day after Memorial Day in the United States on Monday
Demand from institutional investors has been extremely weak after Porter announced plans for the IPO on April 16, but an industry source said that at $5.50, the IPO will march ahead to raise the $120-million originally targeted. "The revised price came after market feedback and dialogue with institutional investors," said an industry insider.
However, in reducing the price, it means that relinquishing 35.3 per cent of the company is more than Porter founder and president Robert Deluce wanted. He had previously hoped to sell roughly 28 per cent of privately-owned Porter in the IPO.
Since launching operations in October, 2006, Porter has enjoyed a monopoly on commercial flights at Billy Bishop, located on an island off downtown Toronto. But Air Canada Jazz is seeking to start its own service from the airport by the end of this year, possibly with six to 10 round-trips daily on each of the Toronto-Ottawa and Toronto-Montreal routes. Houston-based Continental Airlines Corp. could start with two round-trips daily on the Toronto-Newark route.
None of the existing Porter shareholders are selling any of their stock in the IPO. The leading shareholder is Regco Capital Corp., the vehicle of a group of investors led by Mr. Deluce, veteran Bay Street money manager Ira Gluskin and Donald Carty, Porter's chairman. The other key Porter shareholders are EdgeStone Capital Partners, GE Asset Management Inc., Dancap Private Equity Inc. and a unit of OMERS Administration Corp.