Kinder Morgan Canada Pricing IPO at C$17 for Debut Next Week (1)

(Bloomberg) — Kinder Morgan Canada Ltd. is expected to raise C$1.75 billion ($1.3 billion) in its initial public offering after setting the price of its shares at C$17 each, below the previous range, according to terms of the deal.

Kinder Morgan Inc. is spinning out the subsidiary, which includes the Trans Mountain pipeline system among other assets. Houston-based Kinder Morgan increased the number of shares it will sell in the IPO to about 102.9 million, up from as many as 92.1 million previously, and lowered the price from an earlier range of C$19 to C$22. The proceeds of the deal are unchanged due to the additional shares to be sold.

As a result, Kinder Morgan will retain about 70 percent of Kinder Morgan Canada after the share sale, down from about 75 percent as previously planned, according to the terms.

It’s the largest Canadian IPO since Hydro One Ltd. raised C$1.83 billion in October 2015. Kinder Morgan Canada is expected to start trading next week in Toronto. The terms are due to be officially set on Thursday. Toronto-Dominion Bank and Royal Bank of Canada are leading the share sale.

Kinder Morgan Canada would have a valuation of about C$5.9 billion based on 345 million shares outstanding.

Kinder Morgan decided to push ahead with the IPO this month after running a dual-track process in which it also considered selling a minority stake in the business. The proceeds will be used to help finance its C$7.4 billion Trans Mountain Expansion project, which has already been approved by the federal government and British Columbia.

Greenpeace Opposition

Last week, the Alberta Securities Commission said it was reviewing a request to halt the IPO from Greenpeace Canada, which argued Kinder Morgan might be misleading investors with an “overly optimistic view of the international oil market.” A representative of the commission said it received the comments from Greenpeace Canada as part its prospectus review and declined to comment further on the matter.

Prior to pushing ahead with the IPO, U.S. private equity firm ArcLight Capital Partners was among the final bidders to partner with Kinder Morgan in a joint venture for the pipeline project, people familiar with the matter have said. Brookfield Asset Management Inc. and Australia’s IFM Investors Pty Ltd. also progressed to the late rounds, the people said.

The project is expected to provide western Canadian crude producers with an additional 590,000 barrels a day of shipping capacity from Alberta’s oil sands to Canada’s Pacific Coast, where it could be shipped to the western U.S., according to a regulatory filing. Construction is due to start in September and the project should be completed by December 2019.

Pipeline Oversubscribed

The pipeline’s capacity has been oversubscribed since 2010 and upon completion, 80 percent of its capacity will be under long-term contracts, Kinder Morgan said in the filing.

The largest IPO in Canadian history was Manulife Financial Corp.’s C$2.49 billion offering in 1999. Canadian National Railway Co. raised C$2.26 billion in its IPO in 1995. The biggest government privatization was the C$3.18 billion sale of a about a fifth of Petro-Canada in 2004.

(Updates with cost of expansion project in sixth paragraph.)

©2017 Bloomberg L.P.

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