Bay Street
U.S. firm Packaging Plus LLC is looking north of the border to go public in what's being marketed as a $120-million IPO. In Canada, the holding company will be known as Global Packaging Plus Inc.
The company's operations are pretty easy to understand. For the most part they design and test product packages, but they have also stepped into the logistics business to offer warehousing and shipping services. A majority of the firm's operations are located in the U.S., but it also operates in Amsterdam and China.
On the other hand, the IPO's "repo structure" isn't so straightforward. Because the company is based in the U.S., but is listing in Canada, it needs to transfer its cash flows across the border. To do so, the U.S. operation will pay the Canadian company a preferred share dividend. That's advantageous for the firm because it comes out of the income statement before taxes are paid, lowering the company's tax base.
Because of that, Global Packaging Plus plans to distribute more money to shareholders. A dividend yield of 7 to 8 per cent is currently being thrown around, which puts it near Canadian REITs. As for pricing, the deal is being marketed at a range between $7 and $8.
Although the IPO's structure may seem a bit confusing, it is commonly used by private equity firms. It's also used by companies that operate global subsidiaries. That may be the easiest way to understand it. If a Canadian firm bought a U.S. company, the U.S. cash flows would have to come back into Canada, and the dividend does just that.
RBC Dominion Securities is leading the IPO and Goodmans LLP is advising the issuer on legal matters.
Tim Kiladze