A credit card is used at a store in Calgary.Todd Korol/The Globe and Mail
DEAL OF THE DAY
CPI Card Group pops on public market debut
After all the drama that led up to CPI Card Group Inc.'s public market debut, underwriters ended up pricing it to near-perfection.
In an initial public offering (IPO), the optimal scenario is: Selling shareholders getting out at a good price, institutional investors seeing a nice first-day pop, and the retail guy, who often has to wait until the aftermarket to get in, making some money too. Check, check and check.
Shares in CPI, a Canadian-owned, U.S. credit card maker, rose 22 per cent on its first day of trading on the Toronto Stock Exchange and the Nasdaq. The end result means that all parties can walk away from the process feeling satisfied. Twenty hours earlier, such an outcome did not look likely.
Early Thursday, CPI's CEO Steve Montross unexpectedly announced that "due to heightened volatility in the market, CPI's IPO did not price as close to the offer as originally planned." The range of $12 (U.S.) to $14 that CPI had been hoping for was out the window. Later in the day, CPI announced that it had reached an agreement with investors to sell its stock at the drastically reduced price of $10 a share.
Of the 15 million new shares that were issued, BMO Nesbitt Burns Inc. got the biggest allocation as it landed the prestigious "lead left" underwriting role. The Canadian broker placed 4.1 million shares. Goldman Sachs & Co. Inc. and CIBC World Markets Inc., which co-led the offering, were allocated three million shares each.
The underwriting syndicate of eight investment banks are splitting $7.5-million in fees at a commission of 5 per cent. On a $150-million IPO, that might sound like a lot of money, but in this case underwriters can argue that they truly earned it.
MERGERS AND ACQUISITIONS
Labatt to buy craft brewer Mill Street
Mill Street Brewery, one of Canada's leading makers of craft beers, is been swallowed by Labatt Breweries – the formerly independent industry giant that now belongs to the world's largest brewing group.
The acquisition of the privately held Toronto-based company will help Labatt market the craft label in new areas, including Quebec – the only province that currently doesn't have any distribution of the Mill Street brand. Full story
Clearwater Seafood to buy U.K.'s Macduff Shellfish
Nova Scotia-based Clearwater Seafoods has a deal to buy Macduff Shellfish Group for the equivalent of $195-million (Canadian).
Macduff is a U.K.-based integrated seafood company with a strong presence in the European Union. Full story
Denmark's DSV offers $1.35-billion (U.S.) for UTi Worldwide
Danish firm DSV, the world´s sixth-largest logistics company, has agreed to buy U.S.-based UTi Worldwide Inc. for $1.35-billion in a move aimed at boosting its long-term growth prospects outside Europe.
The deal is the latest in a series of mergers and acquisitions within the transport and logistics industry as companies try to counter slow growth by buying new businesses. Full story
PRIVATE EQUITY
TorQuest's spins a new yarn with latest acquisition
Years after Listowel, Ont.-based Spinrite was pulled off the public markets, the company is trading hands, and its new private equity backer is stitching together a growth plan.
Spinrite is a major North American producer of craft yarn for knitters and crocheters. It sells well-established brands like Patons, Caron and Bernat through big chains like Wal-Mart. Many of the acrylic fibres are created overseas in places such as Turkey or South America and then spun into yarn and packaged about two hours outside of Toronto. Full story
INITIAL PUBLIC OFFERINGS
Instructure files for IPO
On Friday, U.S. education software company Instructure Inc. filed with U.S. regulators for an initial public offering of common stock. Full story
VENTURE CAPITAL
Founders' fund aims to kick-start Vancouver's tech community
Vancouver startup types talk of emulating the "Paypal Mafia" in Canada, a nod to employees and founders of the payments company who reinvested their bounty from its 2002 sale into other successful ventures including YouTube, Tesla Motors and LinkedIn.
They're off to a good start: Several West Coast entrepreneurs, including Hootsuite chief executive officer Ryan Holmes, Plentyoffish.com founder Markus Frind and ex-Coastal Contacts CEO Roger Hardy have plowed millions of their net worth into other startups, in the hopes of creating what Mr. Holmes has dubbed the "Maple Syrup Mafia." Full story
INSIGHT
Want to get a deal done fast? Try 'bumpatrage'
There aren't a lot of words that you can put in Google's search engine and get only a handful of hits back – but 'bumpatrage' is one of them.
Yet if you're an investment banker, the word bumpatrage means something. It's one of the newest buzzwords in the business.
I heard the term myself for the first time this week. I was attending the Activist Investing in Canada Conference in Toronto, which attracted a bevy of financial bigwigs – Wall Street investment bankers, lawyers and plenty of buy siders too, including Paul Hilal, a partner at hedge fund Pershing Square Capital Management.
During a lively panel discussion that featured two investment bankers and two mergers and acquisitions lawyers, Tyler Brooke, vice-president of the investment banking division at Goldman Sachs & Co., not only demystified bumpatrage, he also provided a recent example when a U.S. private equity company employed bumpatrage to get a deal done.
"Texas [private equity] shop Lone Star was buying a U.K. construction company," Mr. Brooke explained. He said the U.K. construction company then asked for a big bump in the offer price, and instead of the usual back and forth over pricing, Lone Star instead approved the bump right away.
"It's a private equity fund with two or three votes making the decision. ... And there's a memo that goes out and they say 'yeah we'll bump it.' And so then the deal's done," he said.
Instead of the transaction taking a month, it was in the bag in twenty four hours – and Lone Star did not have to contend with, or compete against, third-party bidders.
The beauty of bumpatrage is the M&A process is drastically shortened. Bumpatrage, however, has its risks, drawbacks and limitations. In a bumpatrage scenario, the target may end up selling at a lower price than had the process gone through the usual protracted public auction process with other third parties getting involved. The buyer, meantime, could end up overpaying.
And while it may be a cinch for two private companies to use bumpatrage, good luck pulling that off in a process with two publicly-traded companies involved. Investors must be notified, press releases must be filed, shareholder votes must be held. You get the picture.
The term bumpatrage was coined by New York-based investment banker Chris Young who works as head of contested situations at Credit Suisse.
Got any Bay Street buzz? If you have any story suggestions for the Daily Deal Roundup, e-mail us at deals@globeandmail.com or nmcgee@globeandmail.com.