By Doug Alexander
Sept. 10 (Bloomberg) -- Stocks sales in Canada surged to the highest in a decade this year after Barrick Gold Corp. and Fairfax Financial Holdings Ltd. led the biggest one-day sale of equity in Canadian history.
Barrick, the world’s largest gold producer, raised $3.5 billion selling common shares to unwind gold-price hedging contracts. Fairfax, the Canadian insurer, sold $1 billion in shares on Sept. 8 to finance an acquisition.
“It’s a very strong sign for the economy,” said Roman Dubczak, vice chairman and head of equity capital markets at CIBC World Markets, which led the Fairfax sale. “It’s quite positive for the economic environment if corporations are able to finance quite readily in equity and fixed-income markets.”
The stock sales this week add to $25.1 billion in new Canadian equity financings between January and August, on track for the highest nine-month total since at least 1999, when Bloomberg began collecting data. Canadian stock sales rose in the first half of the year as Royal Bank of Canada and other lenders sold more preferred shares.
“The rebound in the market is suggesting, rightly or wrongly, that there is a recovery coming,” said Paul Hand, managing director of equity capital markets at Royal Bank’s investment banking unit in Toronto.
A rally in Canadian stock prices is driving companies to sell common shares as well. The benchmark Standard & Poor’s/TSX Composite Index has risen 45 percent since its March 9 low, led by financial stocks. The S&P 500 jumped 53 percent since then.
New Issues
“Investors are putting a lot of their money back into equity markets and enjoying new issues,” CIBC’s Dubczak said. “A year ago the markets were quite shut down from an equity perspective, so there’s a catch-up as well.”
Canadian equity offerings fell 6.6 percent to $32.2 billion in 2008 from the previous year, as initial stock sales plunged 81 percent, according to Bloomberg data. The value of IPOs this year has already doubled, led by a C$500 million ($463 million) spinoff of an energy unit by Epcor Utilities Inc. of Edmonton, Alberta.
“Investors are evaluating opportunities to reposition portfolios and deploy cash, which has led to significant investor demand in North America and overseas,” said Kirby Gavelin, co-head of equity capital markets at RBC Capital Markets, which led the Barrick sale.
Paladin Energy Ltd., the Toronto-listed uranium producer, said Sept. 8 it would sell shares worth as much as 15 percent of its capital. Brookfield Properties Corp., owner of New York’s World Financial Center, raised $1.04 billion last month to refinance debt and make investments.
Osisko Mining
Other firms that sold shares this month included Osisko Mining Corp., which raised C$149.5 million. Silver Wheaton Corp. may offer as much as $287.5 million of stock to buy silver assets from Barrick. WestJet Airlines Ltd., the country’s second-biggest carrier, said yesterday it plans to raise as much as C$172.5 million.
Barrick’s stock sale may rise to $4 billion if the banks leading the sale unload additional shares to meet demand. The Barrick offering topped the C$3.19 billion sale of the federal government’s stake in Petro-Canada in September 2004, previously the largest in Canadian history. Barrick had originally planned to sell $3 billion in stock, and increased the sale to $3.5 billion yesterday.
Barrick’s sale “makes a lot of sense” to help them reduce hedging contracts, said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York, which owns the stock. “The fact that they increased it by another half a billion was an indication for the appetite in the market.”
A bank group led by RBC Capital Markets, Morgan Stanley, JP Morgan Securities and Scotia Capital will share $122.5 million from arranging the Barrick sale, based on a 3.5 percent fee, according to sale documents.
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