DEALTALK-Canadian companies lining up to go public

* Bankers see activity resuming in the fall

* Canadian bankers hoping for a piece of GM IPO

By Pav Jordan

TORONTO, July 30 (Reuters) - A backlog of Canadian companies are eager to go public, but as the downsizing of MEG Energy's IPO this week suggests, demand remains fragile as the market struggles to rebound from the 2008 downturn.

MEG, which first targeted an initial public stock offering worth more than C$1 billion, said on Thursday it would sell fewer shares at a lower price to raise C$700 million. It plans to use the money to fund expansion.

Other large IPOs have also priced below target, and sponsors of at least three withdrew them in recent months. The most prominent was a C$120 million offering by Porter Aviation Holdings Inc, an upstart regional challenger to Canada's major airlines.

"I think (the market) is going to continue to improve, but right now, it's not great," said Philip Smith, deputy head of global investment banking at Scotia Capital (BNS.TO) in Toronto. "And that's borne out in a bunch of stats, including the number of IPOs in Canada and the U.S. that have either been priced below their range or have been pulled."

Bankers say companies in sectors ranging from retail to resources, oil, manufacturing, real estate and even agriculture could go public under the right conditions.

In the year to date, companies have raised or announced plans to raise about C$4 billion in initial public offerings, not including Canadian outfits listing in other markets. [ID:nN30170992]

That's a far cry from boom years like 2005, when companies raised some C$7.5 billion, and 24 IPOs were larger than C$100 million.

IPOs raised C$7.3 billion in 2004 and slipped to C$6.7 billion in 2006 before falling off to C$4.5 billion in 2007.

As the global economic crisis hit, the IPO market all but dried up, with about C$700 million in issues in 2008 and C$1.9 billion last year.

Bankers say the market is back again in 2010, but only for the most agile companies with proven track records.

"Over the past seven or eight years or so ... you had a market that was almost always open. We are now in a market of windows, so that means when there is a window, when confidence is built, you have to act fast," said Ted Larkin, UBS Securities' Canada head of equity capital markets.

Names bandied about for IPO include Husky Injection Moulding Systems, owned by Canadian buyout giant Onex Corp (OCX.TO), and Hudson Bay Co, Canada's oldest retailer, owned by U.S.-based NRDC Equity Partners.

Canadian bankers are also hoping to get a piece of General Motors Co [GM.UL], likely to file for an IPO as early as next month that could be as much as $20 billion.

IPOs started strong this year before activity died off in May as sovereign debt woes in Europe and other shocks stifled confidence, but investment bankers see the market coming back to life in September and through the fourth quarter.

"We have several IPOs that we're looking at, not just for September, but in the fall," said Peter Miller, head of equity capital markets for Canada at the Bank of Montreal (BMO.TO).

"And in talking with other dealers across the street, I think they have similar pipelines."

He said the IPO market is becoming more attractive to companies as Canadian appetite for risk improves and companies position themselves for growth as the economy recovers. Strong commodity markets and good valuations also favor Canada's resource-rich equity markets.

Bankers agree that larger IPOs like MEG or Athabasca Oil Sands (ATH.TO), which raised C$1.35 billion earlier this year, are the ones most likely to attract investors eager for liquidity. At the same time, the IPO market is unlikely to regain its pre-crisis depth until investors are comfortable with the economic recovery.

"The passage of time is what it's going to take," said Smith. "It's not dissimilar to what we've had in other periods of economic weakness, where the IPO market evaporates and it takes a couple of years to come back."

(Reporting by Pav Jordan; Editing by Frank McGurty)