A Bay Street sign in Toronto’s financial district.MARK BLINCH/Reuters
The latest big bought deal appears to have gone down without too much of a fuss.
Yesterday, after the markets closed, DH Corp. announced a $825-million bought deal financing package as part of its $1.25-billion acquisition of payment services provider Fundtech. As per usual, brokers agreed to buy the shares at a discount with the intention of flipping them for a quick profit. The trick is to price the deal high enough to keep the company issuing the stock happy, but low enough to entice investors to bite. The risk is often shared among investment banks, as is the case here, with CIBC World Markets Inc., RBC Dominion Securities Inc. and Scotia Capital Inc. co-leading the deal.
DH Corp. shares were halted late yesterday at $39.60 . The bought deal was announced at $37.95, which is a discount of about 4 percent. Today, DH shares are trading around $38.70. Right in the sweet spot. Not too hot. Not too cold.
Two of the three brokers that led the DH Corp. offering headlined another bought deal announced early Tuesday. Scotia Capital Inc. and RBC Dominion Securities Inc. are co-leading a $200-million preferred share offering for pipeline company, Pembina Pipeline Corp.
"A preferred shares issue is very different from a common share issue," said Bill Bonner, portfolio manager with Calgary-based Brickburn Asset Management in a telephone interview. "It becomes a yield play. There's no growth aspect to owning a security like that." Mr. Bonner says the deal appears to have been fairly priced.
The preferred shares will offer an initial yield of 4.75 percent and investors will be paid out four times a year. Brickburn Asset Management did not participate in the bought deal, but clients own shares in Pembina. Mr. Bonner says he loves the name.
"Pembina's business is a quasi-utility so the rate of return that it earns on a project is regulated…. unlike an oil and gas producer that is totally exposed to fluctuating commodity prices."
Niall McGee