February 4, 2011 / 7:57 PM / 7 years ago

UPDATE 2-Scotia Capital says Canada poised for IPO surge

* Says IPOs could exceed C$5.8 bln seen in 2010

* Several could exceed C$1 bln-plus

* Secondary offerings could raise C$40-C$50 bln

* Says more foreign issuers to list in resource space (Adds details, quotes, background)

By Pav Jordan

TORONTO, Feb 4 (Reuters) - The Canadian IPO market is poised for a strong year, with a handful of deals topping the C$1 billion mark, and in sectors that haven’t shown strength for years, according to the deputy head of investment banking at Bank of Nova Scotia (BNS.TO).

Optimism about the economy will help drive the market, said Philip Smith, also a managing director for Scotia Capital, the investment banking arm for Canada’s No. 3 lender.

“You’ve got much better fund flows in favor of equities, where a year ago it was nascent,” said Smith, pointing at growing levels of capital flowing into stocks after taking shelter for years in money market and bond funds.

“There are a number of quite large IPOs, over a billion dollars, that could come in in calendar 2011,” he said in an interview from his offices in Toronto.

He said the biggest new offerings will come from non-resource names, possibly reawakening sectors that have been all but dormant for years, such as consumer and industrial products, and technology.

Many more technology companies -- both hardware and software -- will likely test the IPO market, he said, and as long as the megadeals are not pushed into next year, IPO’s for 2011 may surpass 2010 figure of around C$5.8 billion.

Another driver will be the foreign resource companies -- from the United States, Latin America and Asia -- which are expected to list in Canada to raise cash for organic growth or takeovers.

Last year Scotia Capital was the bookrunner on an IPO by Eagle Energy Trust EGL_u.TO, a U.S. light oil operation that raised C$150 million on the Toronto market but whose operations are Texas-based.

The Canadian market attracts foreign issuers for a number of reasons, not least of which is it can take half the time to go public in Canada as it does in a market like the United States.

    That means issuers can take advantage of market windows, timing an IPO to conditions more to their liking. In the natural resources space in particular, Canada is known for its liquidity and knowledgeable investor base.

    Then there may be the return of companies that tried to go public in Canada last year but failed, with at least nine pulling the plug on IPOs at the last minute because they could not attract enough investor interest.

    In October SNC-Lavalin (SNC.TO) dropped plans to raise C$850 million through an IPO of its highway concession division, citing adverse market conditions. That came shortly after Porter Aviation Holdings Inc, a regional airline operating out of Toronto, said it had suspended plans for C$120 million IPO.

    Other deals that were canceled included Global Packaging Plus, Brasoil Exploration Corp and Atis Group Inc, all of which had targeted IPOs of more than C$100 million.

    “You might see companies that wanted to go public last year but either couldn’t or didn‘t, return to the market this year,” he said, not commenting on any deal in particular.

    Smith said there were a fair number of IPO candidates in Canada in the C$150 million to C$250 million range, considered the sweet spot of the domestic IPO market.

    “You’ve seen lots of resource related (issues) and that will continue, but that has been going on for some time. You are going to see the greatest increase in the non-resource names.”

    He said the secondary market in Canada should hold traditional levels of between C$40 billion and C$50 billion for the year, but that could rise if merger and acquisition activity picks up even more than it has.

    $1=$0.99 Canadian Reporting by Pav Jordan; editing by Rob Wilson

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