Shred-it International Inc. is considering going public in a sizable share offering, hoping to cash in on Canadians' seemingly insatiable demand for non-resource stocks.
The company, which is based in Oakville, Ont., and specializes in paper shredding and document destruction, is looking to raise roughly $500-million through an initial public offering, according to people familiar with the deal. If successful, it would value the company at more than $2-billion.
Shred-it was acquired in 2009 for an undisclosed amount by a private equity consortium led by Toronto-based Birch Hill Equity Partners. Private backers typically plan on investing in companies for five to seven years, and then find a way to cash out.
Not only would a Shred-it IPO fit with this timeline, it would also jive with a surge in investor demand for anything-but-resources. In the past year, energy stocks have tumbled and metals and mining companies remain in the penalty box, but traditionally stable sectors such as consumer staples are highly sought after.
Cara Operations Ltd.'s IPO this year opened the floodgates for non-resource IPOs. Cara, which owns restaurant chains such as Swiss Chalet and Milestones, fit with the theme and its $200-million deal garnered $4-billion worth of demand.
Following in its footsteps, Montreal media company Stingray Digital Group is now looking to go public in a $120-million deal. The privately held firm is best known in Canada for its flagship product Galaxie, which streams music on pay-TV channel lineups across the country and in 110 other nations.
When Birch Hill invested in Shred-it six years ago, the company had operations in 16 countries and its roster of clients included police forces, hospitals and bank branches. Co-investors in the deal included Crossroads Capital Investments Inc. and Westerkirk Capital Inc.
Since then, Shred-it has struck acquisitions to expand its global footprint. Recent deals include an asset swap with Iron Mountain Inc. that involved acquiring shredding assets for $30-million (U.S.) and selling Securit Records Management Inc. for $29-million in November, 2014. From 2011 to 2014, Shred-it acquired 28 "secure destruction" companies.
Shred-it's ownership structure has also changed. The company merged with the document destruction business of publicly-traded Cintas Corp. to create a new company in March, 2014, that operates under the Shred-it name. The deal saw Cintas become a 42-per-cent owner of Shred-it; the original shareholders now own 58 per cent of the company. At the time of the deal, the combined company had over $600-million in annual revenue.
Shred-it was founded in 1988 by Greg Brophy, who became a prominent businessman before dying in float plane crash in Anchorage, Alaska, in 2007. The company did not return a request for comment. Birch Hill declined to comment.