Copperleaf was founded in 2000 but shifted into its current iteration as a software maker in the late 2000s and was led for most of the subsequent period by Judi Hess, seen in 2019, who is now the company's vice-chair.Rafal Gerszak/The Globe and Mail
Copperleaf Technologies Inc. CPLF-T has agreed to a $1-billion takeover by IFS AB, making it the ninth out of 20 tech companies to reverse course after going public during an unprecedented rush of new issues on the Toronto Stock Exchange in 2020-21.
The Vancouver company, which sells artificial intelligence-powered software to large enterprises such as utilities and transportation infrastructure giants to analyze, plan and budget how to spend their capital budgets, said Tuesday it had agreed to a bid of $12 a share from the Swedish company.
The deal follows an auction that started earlier this year after IFS approached Copperleaf about a potential takeover for at least the second time, according to a source familiar with the deal. The Globe and Mail is not identifying the source because they are not authorized to discuss the matter.
The offer represents an 18-per-cent premium above Monday’s closing price, though it is also 20 per cent below Copperleaf’s initial public offering valuation of $15 per share in late 2021.
Copperleaf stock has been one of the top tech gainers on the TSX since it announced better-than-expected first-quarter results on May 9. Bank of Montreal analyst Thanos Moschopoulos said in a subsequent note to clients that Copperleaf had become “the fastest organic grower among the software companies we cover.”
In a note to clients on Tuesday, Royal Bank of Canada analyst Paul Treiber said the “takeout comes just as momentum is accelerating.”
“While the takeout price appears fair … we believe Canadian public investors lose out on a compelling small-cap software growth story,” he said, adding the outcome represents “another bittersweet end for a Canadian small-cap software stock.”
Mr. Treiber said Quebec City-based e-commerce software developer Coveo Solutions Inc. and Kitchener, Ont.-based educational software maker D2L Inc. should also be considered potential takeout candidates.
Copperleaf chairman Amos Michelson, a Vancouver tech industry veteran who owns 8.4 million shares, or 11.3 per cent of the stock, said in a statement that the transaction ”is a great milestone in Copperleaf’s journey.”
“It’s evidence of IFS’s belief in our organization and recognition of our success, and rewards our shareholders with attractive cash consideration, providing immediate value and liquidity for their shares,” he said.
IFS chair Darren Roos said in a statement: “The combination of Copperleaf and IFS creates compelling value for the complex, asset-intensive customers we serve as well as partners, investors and employees.”
Copperleaf is the second Canadian technology company IFS has acquired in as many years. In June, 2023, the Swedish company bought Quebec City-based Poka Inc., which offers social-media platforms designed specifically for factories.
Copperleaf was founded in 2000 as an IT consultant to utilities, but shifted into its current iteration as a software maker in the late 2000s. It was led for most of the subsequent period by Judi Hess, who had previously held senior software roles with MDA and Creo. The company was profitable for most of the 2010s before increasing spending as it prepared to go public and started losing money. Ms. Hess, now Copperleaf’s vice-chair, ceded the reins to veteran enterprise software sales executive Paul Sakrzewski early last year.
PenderFund Capital Management Ltd., a Vancouver-based investment firm that owns roughly 11 per cent of Copperleaf, is “thrilled” by the offer from IFS, Maria Pacella, managing partner of its Pender Ventures division, said in a phone interview.
Pender stands to profit from selling its shares to IFS, Ms. Pacella said, although she declined to provide details on the size of its potential profit.
Copperleaf was one of the last of an unprecedented slew of Canadian technology companies to go public on the TSX from mid-2020 to late 2021 as investor interest in the sector soared during the pandemic. Its shares were priced at $15 a share after it received investor interest during its road show, and jumped to $22.88 on its first day of trading in October, 2021, as it raised $140-million.
However, tech stocks, including Copperleaf, soon fell sharply as the spectre, later realized, of rapidly rising interest rates cooled interest for speculative early-stage companies. Eight others among the 20 that went public on the TSX are going or have gone private or delisted. That includes Montreal payments software company Nuvei Corp., whose privatization deal is under way.
Meanwhile, Lightspeed Commerce Inc. founder Dax Dasilva mused shortly after returning as CEO this spring that his point-of-sale commerce software company could consider doing the same.
Other more seasoned Canadian-listed software companies including Absolute Software Corp., mdf commerce inc. and TrueContext Corp. have also recently agreed to buyouts.
Sean Silcoff
Jameson Berkow