A Loblaws store in Ottawa.CHRIS WATTIE/Reuters
The investment banking unit of Canadian Imperial Bank of Commerce has won the lead role on what is sure to be one of the marquee transactions of 2013, the initial public offering of a real estate investment trust holding properties from Loblaw Cos.
CIBC has long been a lead bank to Loblaw, acting in lead roles on other financings, and it has one of the street's best regarded retailing stock analysts in Perry Caicco.
Even so, somewhere there is probably a Loblaw warehouse full of not comestibles but pitch books from bankers trying to convince Loblaw to create a REIT. The idea has been around for years. What has changed?
The market is certainly conducive. The spread between valuations on grocers and real estate firms is huge. A grocery company stock might fetch a single digit multiple of cash flow, while real estate valuations are well into double digits. So the timing is right.
A look at the management suite is also instructive, as there are new faces in the brain trust overseeing the company, replacing executives who had spent many years saying no thank you to the idea. They include Richard Dufresne, the new chief financial officer at George Weston Ltd., which controls Loblaw. He joined earlier this year.
Aside from CIBC, the rest of the banking syndicate has yet to be chosen. Look for that to happen early next year as the offering process moves along.