Sunday 19 August 2018

Canada calls for IPL's long-awaited listing

But the plastics firm formerly known as One51 still has some hurdles to jump, writes Samantha McCaughren

Under the guidance of chief executive Alan Walsh IPL will list on the Toronto stock exchange
Under the guidance of chief executive Alan Walsh IPL will list on the Toronto stock exchange
Samantha McCaughren

Samantha McCaughren

When around 2,000 shareholders see a scheme of arrangement for the listing of IPL Plastics dropping through their letter boxes next week, it will surely be a surreal moment for many. For over a decade the company, known previously as One51, has been linked to a stock market listing - both by market commentators and the company itself.

And while a promise first made by former chief executive Philip Lynch to list the company is now finally being delivered upon, it is not quite in the form which anyone would have expected all those years ago.

The company started life as a ragbag of investments, holding stakes in firms as disparate as Irish Ferries owner ICG and bread business Pat the Baker, while its roots were very firmly set down in Thomas Street, Dublin. It was the most Irish of companies, born out of the Irish Agricultural Wholesale Society (IAWS).

When it lists in late June, the company will float on the Toronto Stock Exchange (TMX) and will be a pure play on plastics manufacturing, currently focused on North America.

Quite a transformation.

So what will the co-ops make of this latest in chapter in One51's corporate tale? The co-ops are a key group of shareholders but they have said very little publicly on the many twists and turns in the plot line of One51, which has recently been renamed IPL Plastics.

The co-ops have stuck with the company through thick and thin - and certainly there were some lean times, such as when the share price traded as low as 15c on the illiquid grey market - a halfway house which saw the stock traded on a limited basis.

For some, the listing marks the final step in a turnaround for the business. The stock is likely to list at around €2 a share as chief executive Alan Walsh delivers on the long-promised IPO. A company announcement last week put in motion a series of events to ensure the listing occurs within two months.

"The announcement on Tuesday made the whole thing real for the company. An IPO for One51 has been spoken about for years, but it's actually happening," said one source familiar with the firm.

However, not all shareholders are entirely enthusiastic about the Canadian listing. The route to Toronto started out in 2015 with the Irish company taking a majority stake in Canadian company IPL for €201m.

"This is a transformational deal for One51 but it's not just about scale, it's about strategic fit," said Walsh at the time. Few realised just how transformational it would be.

At the time of that deal, One51's minority partners were Fonds de Solidarite FTQ (FSTQ), a Canadian government agency which backs investment in Quebec and Caisse de Depot et Placement du Quebec (CDPQ) a long-term institutional investor that manages funds for the Canadian public sector.

Since then the Canadian investors have become ever more powerful, with CDPQ buying a 25pc stake from businessman Dermot Desmond in May 2017.

When this newspaper broke the story of a planned Canadian IPO last May, the company was still open to a dual listing in Dublin also. However, it is now only listing in Toronto.

In recent days Canadian media reported that the company's headquarters would move to Toronto. "The current head office in Ireland will become a secondary office," said the report. However, sources in Dublin insisted that Dublin would remain the company's head office. At present 80pc of revenues come from North America and the company management has previously expressed a desire to make a large acquisitions in Europe.

Irish shareholders will be keen to see a big deal to rebalance the business's geographic loyalties .

Price will also be a big issue for shareholders.

Many co-op shareholders hold stakes allocated to them through IAWS and will see plenty of upside in any listing. But others hark back to 2007, when the stock debuted on the grey market and enjoyed a lift of 20pc to see shares soar to €6.

"Some of them are very focused on the shares they bought at €3.50 and above," said one market source.

There are also concerns about the level of appetite there will be for the stock. After the listing Irish shareholders will continue to hold over 40pc of the shares, so there are potentially a significant block of sellers ready to exit.

Paramount to IPL's listing plans is ensuring a rush to sell will not destabilise the newly listed business.

In response to concerns among the IPO's underwriters, the company has put in a number of measures to mitigate this possibility - what market sources dub a 'structural lock-up'.

Firstly there is a share buy-back of CA$50m (€32m). This equates to just over 7pc of the stock at the current share price. There is doubt in the market that take-up will be significant - newly listed stock debuts at a discount and usually enjoys a lift in price when it first trades.

However, taking the money could appeal to shareholders with a large chunk of shares - perhaps a million or more.

The second mechanism to allay the concerns of the underwriters is a six-month lock-in for stock. One new share will be given for every five IPL shares and initially these will trade on the grey market, mirroring the value of the TMX shares.

Again, the hope is that there will no rush to offload stock and destabilise the share price.

The listing is expected to take place in late June and a number of events must take place to pave the way for the flotation. Last Thursday there was a court hearing to set a date for approval the scheme of arrangement, which will be on May 17, the same day as the AGM. On Tuesday, the scheme of arrangement documents will be sent to shareholders. On April 30, the preliminary IPO prospectus will be filed in Canada. After May 17, an application for the buy-back scheme will be circulated. Later that month, a final prospectus will be filed, with the company expected to embark on its roadshow in June.

Many long-time observers argue that although the One51 journey has been a bumpy one with a surprising destination, the outcome is a good one for shareholders. "There are no tax implications, it is seamless in terms of the ability to trade those shares and they have a choice whether to hold that investment or sell it at the end of the day," said one source.

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