Aritzia Inc.'s private investors appear to be capitalizing on positive market sentiment as they offload more of their shares just three months after the Canadian women's-fashion retailer went public.
The Vancouver-based company's private-equity owner Berkshire Partners LLC, founder and chief executive officer Brian Hill, and director Aldo Bensadoun have entered into an agreement to sell 20.1 million subordinate-voting shares for $17.45 apiece in a bought deal, Aritzia said in a news release late Tuesday. It is uncommon to see a company sell more shares so soon after their initial public offering.
In the first trading session since the announcement, shares of Aritzia fell 5.6 per cent mid-day on Wednesday to $17. It is difficult to decipher how the market will receive a bought deal, but investors have been bullish on the young public-company's stock. When the stock launched on the Toronto Stock Exchange in October, the deal was over-subscribed.
The group of underwriters buying the shares at a discount to Tuesday's closing price of $18 is led by CIBC World Markets Inc., Bank of America Corp.'s Merrill Lynch and TD Securities Inc.
If an over-allotment option to buy an additional three million shares from Berkshire and Mr. Bensadoun is exercised in full by these underwriters, the selling investors are expected to raise a total of $403-million from the sale before fees are deducted. The company will not receive any proceeds from the offering.
The stock sale comes just three months after Aritzia began trading in Toronto, raising a total of $460-million for Berkshire and Mr. Hill. They sold 28.7 million of their subordinate-voting shares for $16 each, which was the high-end of the marketed range of $14 to $16 after "exceptionally strong" demand from institutional investors.
On Monday, the retailer reported results for its third quarter ended Nov. 27 that exceeded analysts' expectations. Aritzia, which operates 75 stores in Canada and the United States, as well as an online business, has said that it plans to double its revenue by 2021 by opening new stores in hot markets including Los Angeles, and growing its Internet sales.
Irene Nattel, an analyst at RBC Dominion Securities Inc., said in a research report to clients that she believes Aritzia is on the path to delivering its 2021 targets. She also noted that the stock can capitalize on today's "scarcity of meaningful growth opportunities in the Canadian consumer space."
In a separate transaction, Aritzia also said Tuesday that a group of its employees, excluding Mr. Hill, will be selling 1.8 million subordinate voting shares in one block trade, raising $31-million. To complete the order, the company said it will release certain option-holders from lock-up arrangements. It also plans to release other staffers from lock-ups to sell up to 968,210 shares following the main offering, provided the market price of Aritzia shares is at or above $17.45.
After the main offering and employee block trade are completed, and assuming the over-allotment option is not exercised, Aritzia said that Berkshire and Mr. Hill will control 29 per cent and 23 per cent of the company's shares, respectively, and 51 per cent and 40 per cent of the voting power, respectively.