Concordia Healthcare Corp. said it would buy Amdipharm Mercury Ltd. from private equity firm Cinven in a deal valued at $3.5-billion.PAUL O'DRISCOLL
DEAL OF THE DAY: Concordia Healthcare eschews Canadian bought deal in favour of U.S. stock sale
Concordia Healthcare Corp. is planning a major equity raise to help pay for its latest acquisition – but instead of relying on Canadian investors, it will seek out the funds it needs in the U.S.
"We will not be doing a Canadian bought deal. We are doing a U.S. institutional raise," said chief executive officer Mark Thompson in an e-mail.
The bought deal – a peculiarly Canadian phenomenon, in which brokers agree to buy the shares and then incur the risk of selling them to other investors – usually allows institutions to purchase shares at a discount to the market price. In this case, eschewing a Canadian-style bought deal in favour of tapping the U.S. market makes sense.
"There probably isn't enough appetite or demand in the Canadian marketplace to sop up the amount of supply implied by a roughly $1-billion equity raise," said Andrew McCreath, chief executive officer of Forge First Asset Management, a Toronto-based hedge fund.
Shares in Concordia Healthcare Corp. took a shellacking on Tuesday, losing almost 11 per cent of their value, following the announcement of its $2.1-billion (U.S.) acquisition of Amdipharm Mercury Ltd. One of the big overhangs is the new supply of stock that will be coming to market and the dilutive effect that will have on existing shareholders.
RBC Dominion Securities analyst Douglas Miehm estimates that Concordia will have to raise about $1.3-billion in new equity. Around $700-million of that will be issued to British private-equity company Cinven (already announced as part of the Amdipharm Mercury deal), which leaves around $600-million that will need to be sold to U.S. investors.
Raising money in the U.S. will also allow Concordia to expand its shareholder base. Even though Concordia recently got a stock listing on the Nasdaq, it's still a relative unknown in the U.S. Currently only EVA Dimensions LLC., a bit player on Wall Street in research, covers the stock. That will change in a few months. Mr. Thompson said that Goldman Sachs & Co. will be starting coverage of the company in a couple of months. "Late November at the earliest," he said.
Goldman landed the lucrative spot as Concordia's financial adviser on the Amdipharm Mercury acquisition and is one of its go-to lenders. Goldman will also be leading Concordia's upcoming U.S. stock sale.
FINANCINGS
Aston Hill raises much needed cash
Embattled asset manager Aston Hill Financial Inc. announced it raised $6.3-million (Canadian) via a private placement. The company, which used to have operations in both Calgary and Toronto (now only Toronto), has had a rocky year. It has seen its assets under management plummet – much of that due to the loss of a number of subadvisory mandates. It has also had upheaval in management with its long-term chief executive officer and chief financial officer leaving in July.
The financing, done at 45 cents a unit, was done at a premium to the market price of the shares (the stock closed at $0.33 on Tuesday). The reason investors were willing to buy at a premium is the issue came with a sweetener – a warrant which allows buyers of the private placement to acquire stock at a cost of $0.60 within the next 12 months. If shares in Aston recover that warrant could be valuable. (Shareholders need to have four warrants to buy one common share).
Ben Cheng, the firm's chief investment officer has been cooling his heels for the past six months or so, due to a non-compete he signed after the firm lost the IA Clarington mandate. (He was the portfolio manager on the IA Clarington funds). He'll be back in the fold as a portfolio manager at Aston in November when the non-compete expires. The firm will be hoping that a new fund/funds managed by Mr. Cheng will take off and help the firm gain back some much needed assets under management (AUM).
Aquinox Pharma targets $75-million equity raise
Aquinox Pharmaceuticals Inc., a Vancouver-based pharmaceutical company which develops "targeted therapeutic" cancer drugs, announced that it intends to sell (subject to market conditions), $75-million in common stock in an underwritten public offering. Leerink Partners, Canaccord Genuity and Guggenheim Securities are acting as joint bookrunners. Aquinox trades on the Nasdaq.
MERGERS AND ACQUISITIONS
United shakeup could reignite CSX-CP talks
An executive shakeup at United Airlines Inc. has left railway CSX Corp. without an heir apparent to the chief executive officer's throne and could reignite speculation about a merger with Canadian Pacific Railway Ltd. Full story
Sun Life seals Assurant deal
Sun Life Financial Inc. is boosting its presence in the United States, striking a $975-million (U.S.) deal with insurer Assurant Inc. to expand its offerings of disability, dental and life insurance. Full story
Glencore puts assets on block
Global commodities giant Glencore PLC is hoping to attract attention with possible infrastructure asset sales in Canada at a time when pension funds and other institutional players have been on the hunt for investments abroad. Full story
Bombardier turns down Chinese offer for rail unit
Reuters reported that Bombardier said no to a Chinese offer to buy its rail unit hook, line and sinker. Earlier in the year the Montreal-based train and rail manufacturer said it was looking at selling a stake in its rail unit in an initial public offering in Europe. Full story
Manulife to snap up British pension business worth $400-million
Reuters reported that Manulife Financial Corp. is close to announcing a deal to acquire Standard Chartered's Hong Kong pension business for roughly $400-million. Full story
BAY ST. MOVES
BMO hires energy acquisition and divestiture head in Houston
Bank of Montreal's capital markets arm has hired a new head for its U.S. energy acquisition and divestiture business.
Geoff Roberts, a petroleum engineer who recently ran his own advisory firm and previously worked on A&D for Randall & Dewey and Madison Energy Advisors, is joining BMO Nesbitt Burns. The hire comes after a team of 15 energy banking specialists working in BMO's Houston office left for UBS AG in March. Full story
Veritas bulks up
Independent – some might say "scrappy" – Bay street research shop Veritas Investment Research is bulking up its research team. Sam La Bell has been promoted to head of research. He was formerly the lead analyst covering oil and gas producers. Mr. La Bell has been with Veritas since 2004.
Veritas also announced that Sid Subramani has joined the firm as lead analyst for precious metals and materials. Mr. Subramani is an ex-engineer in the resources sector. He spent the last three years at Hatch, working on strategy, market analysis and due diligence.
Regent joins Potash board
Former Barrick Gold chief executive officer Aaron Regent is joining the board of Potash Corp. of Saskatchewan. Full story
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