ONCAP’s Pinnacle shoots for $200 mln in 2018’s first PE-backed IPO

Pinnacle Renewable Energy Group, an industrial-wood-pellet maker and distributor, this week priced its recently filed initial public offering in Canada.

The Richmond, British Columbia, company is seeking to raise $175 million by selling common shares at $13 to $15 per unit, the updated prospectus shows.

The issue’s greenshoe option, if fully exercised, would bring the total raised to more than $200 million.

Founded in 1989 by the Swaan family, Pinnacle is today the world’s third largest supplier of renewable fuel for electricity generation in the form of wood pellets. It currently operates six production facilities that generate more than 1.4 million tonnes annually, as well as a major shipping terminal on the Pacific coast.

With the increased use of renewable-energy sources, Pinnacle has seen rising demand from global utilities and large-scale power generators. The company’s revenue climbed to more than $290 million over 2014-2017, reflecting a compound annual growth rate of 14 percent.

Pinnacle will account for $70 million of the offering’s proceeds, most of which will be used to fund construction at two production facilities and repay debt.

As much as $130 million of the proceeds will go to selling shareholders. They include ONCAP, the mid-market private equity arm of Onex Corp, which acquired a majority stake in Pinnacle in 2011. ONCAP invested $71 million in the deal.

When the IPO closes, ONCAP’s interest in the company will be reduced to about 37.1 percent, or about 33.1 percent if the greenshoe option is exercised in full.

ONCAP is represented on Pinnacle’s board by Managing Partner Michael Lay and Managing Director Greg Baylin.

Pinnacle will list on the Toronto Stock Exchange under the symbol PL. The offering is being co-led by CIBC Capital Markets and RBC Capital Markets, together with BMO Nesbitt Burns and Scotia Capital as joint book-runners, and National Bank Financial, GMP Securities, Raymond James and HSBC Securities (Canada) as underwriters.

Pinnacle’s IPO is this year’s first in Canada backed by a PE firm. Domestic-market activity is expected to accelerate in the months ahead in the wake of a strong 2017, when new issues raised a five-year record of $5.1 billion, according to PwC.

PE and venture capital firms looking to monetize their investments played a key role in the market last year, raising a combined $2.3 billion. Pinnacle’s IPO, and an anticipated $1 billion IPO by waste manager GFL Environmental, backed by HPS Investment Partners, Macquarie Group and others, suggest this influence will also be felt in 2018.

ONCAP closed its fourth fund, ONCAP IV, in 2016 at about $1.5 billion (US$1.1 billion).

The Toronto investor has recently increased its deal pace. For example, ONCAP in December announced two new platform investments, acquiring rigid-packaging-solutions provider IntraPac from CI Capital Partners and home-fashions-products provider Laces from Novacap.

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