Another formerly public Canadian company is seeking a return to the capital markets in a deal tied to efforts by Power Corp. of Canada to divest its non-financial services businesses.
LED lighting maker LMPG Inc., previously known as Lumenpulse Inc., has filed to go public on the Toronto Stock Exchange with a goal of raising $300-million. The offering, if successful, would see $125-million go to the Longueuil, Que., company and $175-million to investors Power Energy Corp. – a unit of Power Corp. – and Nicolas Bélanger.
LMPG is targeting an offering price of between $15 and $17.50 a share, and expects to price the deal next week.
The offering follows information technology services company Softchoice Corp.’s return to the TSX last month, eight years after Birch Hill Equity Partners took it private. It’s also the latest in a slew of Canadian companies to pursue public listings in one of the busiest periods for IPOs in years.
In addition, LMPG and Power Energy have entered into a private placement deal with the Quebec government’s Investissement Québec (IQ), B.C. Investment Management Corp. and the labour-sponsored investment fund, Fonds de solidarité FTQ.
Under the deal, the B.C. and two Quebec institutions will buy $225-million of stock from Power Energy, while the FTQ will buy $25-million of stock from LMPG. The deal comes with a pledge by LMPG to IQ not to move its head office outside Quebec until seven years from the transaction or if the province’s stake in LMPG falls to below 44 per cent of the stock it is buying.
The complex transaction would see Power Energy, LMPG’s largest shareholder, divest more than 80 per cent of its stake, which it picked up in 2017 when it helped chief executive and founder François-Xavier Souvay lead a buyout of the enterprise, for $600-million.
Power Corp., under the leadership of CEO Jeffrey Orr, is in the midst of efforts to divest non-financial services assets including LMPG; electric-vehicle maker Lion Electric Co.; the parent company of Bauer and Easton sporting goods, Peak Achievement Athletics Inc.; and GP Strategies Corp., a workplace technical training company.
Following the IPO and private placement, Mr. Souvay will have 62.8-per-cent voting control of LMPG through his sole ownership of multiple voting shares. RBC Dominion Securities, Scotia Capital, National Bank Financial, Canaccord Genuity, BMO Nesbitt Burns, Desjardins Securities and TD Securities are underwriting the transactions.
LMPG sells indoor and outdoor high-performance and energy-efficient LED lighting equipment used on some of Montreal’s biggest landmarks including Olympic Stadium, Notre-Dame Basilica, the Jacques-Cartier and Samuel de Champlain bridges, as well as Vancouver’s BC Place, the Pantheon in Rome and city halls in Boston and Cincinnati, Ohio. Most of its business is in the United States.
The company has been hit by the pandemic, as revenues, which increased to $314-million in 2019 from $237-million the year before, fell 14.6 per cent last year as construction activity was stalled.
But thanks to cost-cutting measures dating to 2019, free cash flow more than tripled to $38.2-million last year compared with 2018 levels, while adjusted operating earnings rose to $52.5-million from $35.2-million.
The company booked a net loss of $11-million in 2019 and $6-million last year.
Revenue in the quarter ended March 31 was $55.8-million, down 11.4 per cent from the same period a year earlier, while LMPG’s net loss improved to $2.4-million from $8.4-million. LMPG has invested heavily in research and development, and has 235 patents and more than 800 products.
LMPG is positioning itself as a beneficiary of expected increases in infrastructure spending, the expanding adoption of “smart city” and “smart building” technologies that reduce energy consumption, and an anticipated rise in energy efficiency regulations it believes will mandate LED usage. The company is on the hunt for acquisitions that can expand its product offerings, and paid $65-million in 2018 for Sternberg Lanterns, Inc., a Chicago-area supplier to U.S. municipalities.
“Smart-LED lighting is one of the most actionable technologies that can be used in smart cities and smart buildings to accelerate our transition to a lower carbon future, while improving the quality of life and work for all constituents” Mr. Souvay states in the prospectus. “In a post-pandemic world, this is even more important as we look to bring life and work back to our cities.
LMPG’s previous foray as a public company was underwhelming. Lumenpulse, founded by Mr. Souvay in 2006, raised $115-million at $16 a share in April, 2014. But it often missed earnings estimates due to lumpy profits. The stock was trading below $11.50 in April, 2017, when the buyers offered investors $21.25 per share, an 86-per-cent premium, to privatize Lumenpulse.