Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Canada’s most-awarded
newsroom for a reason
Stay informed for a
lot less, cancel anytime
“Exemplary reporting on
COVID-19” – Herman L
$1.99
per week
for 24 weeks
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Two of the biggest initial public offerings of the year ran into trouble on the same day, with Whistler Blackcomb Holdings Inc. slashing its offer price and TransAxio Highway Concession Inc. cancelling outright, and for a change it's not a case of shaky markets. The culprit was aggressive pricing.

How did they go wrong? Read on.

TransAxio was seeking $900-million at $15 to $16 a share. Right from the get-go, some who examined the numbers said that would be a tough sell. The price valued the underlying asset -- a stake in the 407 toll highway in Toronto -- at a rich level, and investors in TransAxio were being asked to pay up while much of the value would go to SNC-Lavalin Group, which was sponsoring the deal.

Story continues below advertisement

On top of that, Canada Pension Plan Investment Board pushed hard against the deal, a source said. That's no surprise. CPPIB had a lot to gain.

Firstly, the pension fund would get the asset if TransAxio couldn't raise the money. CPPIB had put in a bid for the stake earlier this summer, and that triggered a right of first refusal held by SNC. SNC created TransAxio as a way to raise money to take advantage of the ROFR. With TransAxio out of the picture, the field would be clear for CPPIB.

CPPIB had a second reason to want to stop TransAxio. The pension plan is also bidding for an Australian company that also has a stake in the 407. That deal looked cheap in comparison to the TransAxio offering, so there was a chance that if TransAxio succeeded, CPPIB would also have trouble closing the Australian purchase.

To be sure, there was a strong case that the valuation on TransAxio was aggressive no matter what CPPIB said.

Under the terms of the deal, investors in TransAxio could end up paying as much as 30 per cent more for their highway stake than CPPIB had bid, as detailed by Streetwise in an earlier post. In the end, that kind of math made a deal tough to clear.

A person familiar with the transaction said enough investors probably would have been interested at $13 a share, where the economics were better for TransAxio buyers, but SNC didn't want to consider cutting its price until it was too late.

Similarly, in the case of Whistler and its planned $300-million IPO, the ultimate owners at Fortress Investment Group were "super aggressive" in pricing the first time around, said a person familiar with the transaction.

Story continues below advertisement

For a company with no growth and little diversification, the deal was priced with not enough yield to tempt investors.

The new pricing puts the IPO at $12.50 to $13 a share, with a yield on the stock of 7.5 per cent to 7.8 per cent. That's down from $14 to $15 with a yield of 6.5 per cent to 7 per cent.

Even there, it's not certain a deal will clear. There is said to be about $100-million of institutional demand, but retail demand is weak, said two sources.

Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies