Softchoice Corp. has priced its initial public offering on the Toronto Stock Exchange at between $18 and $21 a share in a planned $350-million deal that would see most of the proceeds go to controlling shareholder Birch Hill Equity Partners.
The information technology services company, which resells software made by giants such as Microsoft Corp., Google Inc. and Cisco Systems Inc. to corporate customers and manages it for its clients, was a public company until 2013, when it was taken private by Toronto-based Birch Hill.
According to Softchoice’s revised prospectus, filed Tuesday with Canadian regulators, Birch Hill plans to sell 27 per cent of its 50.1 million shares, targeting net proceeds of $249.4-million from the offering after deal-related fees and costs. Softchoice intends to use its anticipated $80.1-million net proceeds from the offering to repay debt.
At the midpoint of the share price range, Softchoice would have 58.95 million shares outstanding and a market capitalization of $1.15-billion at issue, according to the prospectus.
Softchoice last week became the latest in a slew of Canadian companies to file for an IPO in recent months, despite increasing volatility in the market, particularly for technology stocks. The offering is being led by TD Securities and Goldman Sachs, with additional underwriting support from RBC Dominion Securities, National Bank Financial, CIBC World Markets, Scotia Capital, BMO Nesbitt Burns, Cormark Securities, Laurentian Bank Securities, ATB Capital Markets, Raymond James and INFOR Financial Group.
Softchoice has 1,850 employees in 26 markets in the United States and Canada, serving 8,700 customers. Its operating earnings improved to US$65-million last year from US$43-million in 2017, although its net sales declined in that time, to US$837-million from US$875-million and from US$954-million in 2019. Net sales in the quarter ended March 31 were up 7.5 per cent year-over-year, to US$233-million. The company earned a net profit of US$2.1-million last year and US$1.8-million in 2019.
Softchoice also last year launched a business transformation plan it expects will improve operating earnings by more than $25-million annually next year.
In a letter to shareholders, chief executive officer Vince De Palma said Softchoice aims to capitalize on the accelerated digital transformation by many organizations brought on by the pandemic, including an expected increase in demand for cloud-based and collaborative digital workplace IT. “Looking ahead, we believe that the prevailing trends impacting our customers and the fragmentation in our market continue to present a tremendous opportunity for Softchoice,” he wrote.
Softchoice is one of 15 companies advancing toward potential IPOs, The Globe and Mail reported last week, although continued market volatility could delay listing plans by some. Technology names such as Q4 Inc. dominate the list, although others looking to test public markets include retailers Neighbourly Pharmacy Inc. and Pet Valu Canada, and dental clinic operator Dentalcorp Holdings Ltd.
Canadian technology IPOs have arrived since last summer at a pace unseen for more than 20 years. But they faced mixed investor reaction: While some, such as Nuvei Corp., Magnet Forensics Inc. and Thinkific Labs Inc. have performed well after their debuts, others have traded down, including BBTV Holdings Inc., and MindBeacon Holdings Inc. Meanwhile, several new issues struggled to get off the ground after the market began to wobble in late winter. Several, including MDA Ltd., Boat Rocker Media Inc., and ABC Technologies Holdings Inc., all had to cut their offering sizes and prices to complete their IPOs.
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