May 21 (IFR) - That BRP, the former recreational products group of Bombardier, would appeal to investors on its IPO is hardly surprising.
Public-comparables Polaris, Arctic Cat, and to a lesser extent Harley Davidson have been on a tear, all trading at historically rich multiples and at or near all-time high share prices.
Realistically the only question was whether the company, acquired by Bain Capital along with members of the founding Beaudoin family and Caisse de depot in 2003, could capture that full valuation. The answer was almost entirely.
Joint bookrunners BMO Capital Markets, RBC Capital Markets, UBS and Citigroup set pricing on an upsized 12.2m shares at C$21.50, the top of a C$18.50-$21.50 marketing range on a deal originally sized at 11.7m shares, according to two sources close to the situation.
The stock will begin trading on a when-issued basis tomorrow morning and formally on the TSX under the symbol "DOO" on May 29, when the deal settles.
That the interest was geographically diverse - 55%/30%/15% in US/Canada/international - is notable in light of pushback on recent Canadian IPOs by Oryx Petroleum and Silver Ridge Power.
A lack of institutional support in the domestic markets forced Oryx, an E&P with assets in Iraq and West Africa, to accept a reduced valuation offered it by European accounts on its IPO. Silver Ridge Power, a solar-power producer backed by AES and Riverstone, pulled its C$150m IPO when faced with a similar proposition.
BRP, which makes popular recreational vehicles such as Ski-Doo jet-skis and Sea-Doo snowmobiles, generates more than one-third of its revenue outside the US and Canada.
The company's manufacturing facility in Finland, for example, provides access to key snowmobile markets across Scandinavia and Russia. The company's products are sold in 105 countries through 4,200 dealers.
At the same time, BRP is shifting a portion of North American production to Mexico to lower operating costs.
To accommodate volume growth, it plans to shift production from Canada to a new facility in Queretaro, Mexico beginning in the second half of 2013, while keeping production at facilities in Canada, Austria, the US and Finland at stable levels.
Management expects the production shift to generate annual savings of US$25m-$30m by fiscal 2017.
By all accounts volumes are on the uptick.
For the fiscal year ended January 31, BRP reported normalised EBITDA (excluding one-time costs) of C$336.1m on revenue of C$2.89bn, up from C$262.2m and C$2.56bn last year.
The results compare to the C$217.3m on C$2.13bn posted for 2011, dragged down by a continued pullback in consumer spending following the financial crisis. Between 2007 and 2011, industry-wide volumes fell from 1.8m units to 900,000 units, the company noted in its IPO prospectus.
BRP is using proceeds from the IPO to repay borrowings on a new term loan that it used to fund a C$374m dividend in April. It plans to distribute an additional C$155m to Bain prior to closing, according to the original IPO prospectus.
By almost any measure, BRP has been a huge success for Bain and its other owners. The IPO valued the company at roughly 9- and 8-times EV-to-Ebitda for 2013 and 2014, in-line with that of Polaris but a discount to the roughly 12- to 13-times that Harley Davidson trades at.
BRP is the hottest consumer goods company to hit the Canadian market since Tim Hortons' C$783m IPO back in 2006 - total demand exceeded the number of shares offered by 10-times, according to sources.