Shares of BRP Inc. (DOO), the maker of Ski-Doo snowmobiles and three-wheeled motorcycles, have surged 31 percent since their May debut, the best performer among Canada’s biggest initial public offerings this year.
BRP raised C$262.3 million ($251.7 million) in its May stock sale and topped the 4 percent average increase of 10 companies that raised at least $100 million from IPOs in Canada this year, according to data compiled by Bloomberg. The Valcourt, Quebec-based firm beat the 22 percent surge of Saskatchewan registry operator Information Services Corp. (ISV) and the 6.9 percent rise of TransAlta Renewables Inc. (RNW), data show.
BRP is benefiting from revenue growth driven by sales of year-round products including all-terrain vehicles and its Can-Am Spyder three-wheel roadsters. The company added the Sea-Doo Spark to its personal watercraft lineup in September, targeting price-conscious buyers. BRP employs 6,800 people worldwide and sells in more than 105 countries.
“We continue to think that longer term BRP is a very attractive business with a limited amount of competitors,” said Brian Huen, managing partner at Red Sky Capital Management Ltd. in Toronto, which manages about C$225 million including BRP shares. “We like the prospect longer term, just given the recovery in consumer spend and industrial spend that we’re seeing, and the technology that’s being applied to these products.”
BRP fell 0.3 percent to C$28.01 at 9:58 a.m. in Toronto. The stock as of Nov. 15 outperformed the 5.8 percent increase of Canada’s benchmark Standard & Poor’s/TSX Composite Index (SPTSX) since its May 22 pricing date. BRP’s 31 percent gain compares with the 43 percent advance of Polaris Industries Inc. (PII), the Medina, Minnesota-based maker of snowmobiles, all-terrain vehicles and Indian motorcycles, the U.S.’s oldest bike brand, in that period.
“We have a very good lineup, a good international presence and good distribution base around the world,” Pierre Pichette, a BRP spokesman, said in a Nov. 15 telephone interview.
BRP is a spinoff of Bombardier Inc. (BBD/B), which in 2003 sold its recreational products business to investors including Boston-based Bain Capital Partners LLC, members of the Bombardier and Beaudoin families who are part of closely held Beaudier Group, and Caisse de Depot et Placement du Quebec, Canada’s second-largest pension-fund manager.
BRP was Canada’s third-largest IPO this year, following the C$400 million sale of Loblaw Cos.’ Choice Properties Real Estate Investment Trust in June and the C$263.5 million offering of Canadian Tire Corp.’s CT REIT last month. BRP’s initial sale was led by Bank of Montreal (BMO), Royal Bank of Canada, UBS AG and Citigroup Inc.
“It was an excellent company for us to be able to take to the market, and as a company it has performed very well,” said Peter Miller, head of equity capital markets in Canada at BMO Capital Markets. “The inflection point of a growing North American economy and consumer demand, particularly in the U.S. being strong, helped to sell the IPO and has helped propel BRP in the aftermarket.”
Still, the performance of BRP and other Canadian IPOs pale by comparison to those in the U.S., Red Sky’s Huen said. The average increase among 93 companies that raised at least $100 million in U.S. IPOs this year is 15 percent, according to data compiled by Bloomberg.
“If you look at the performance of some of the U.S. IPOs, it’s staggering,” Huen said. “These things go up 100 percent in a day.”
Canadian IPOs lag behind their U.S. peers because they lack liquidity, the companies are smaller and are predominantly energy and resource focused, which has less broader appeal, Huen said. BRP’s consumer and industrial expertise and global focus sets it apart from other Canadian firms, he said.
BRP hasn’t had difficulty selling stock in the Canadian market. In October, original investors Bain and the Caisse sold 8 million BRP shares for C$27.85 each — about 30 percent higher than the May per-share IPO price of C$21.50.
“We’re not specialists in the market, we’re new at this, and going into the market was an interesting exercise for us,” BRP’s Pichette said. “We worked hard at it and I guess the result is there.”
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