By Blaise Robinson
Reuters
Wednesday, January 11, 2006
TORONTO (Reuters) - Although most of the initial action may be in New York, Canadian investors are likely to end up owning most of the shares of Tim Hortons after Wendy's International Inc. spins off the coffee-and-snacks chain, analysts said on Wednesday.
Adrian Mastracci, investment counsel at Vancouver’s
‘fee-only’ KCM Wealth Management, says, "The company is well known on both sides of the border by now, and maybe Canadians have more affinity for it because they probably knew of Mr. Tim Horton to begin with.”
Wendy's, which filed for a $600-million initial public offering of Tim Hortons shares last December, is expected to put a 15 to 18 percent chunk of the chain up for sale as soon as March.
Wendy's said it will spin off the rest of Tim Hortons in the following nine to 18 months, depending on market conditions.
The expected price range and the number of shares to be offered on both the New York and Toronto bourses have not yet been set.
Fast-growing Tim Hortons, which Wendy's bought in 1995, is the No. 1 coffee-and-snacks chain in Canada and has been expanding into the United States in recent years.
But with just 260 stores in the United States -- mainly in New York, Michigan, Ohio, Rhode Island and Connecticut -- compared with more than 2,500 stores in Canada, the chain's IPO could have more success on Bay Street than on Wall Street, said John Kinsey, a portfolio manager with Caldwell Securities Ltd., in Toronto.
"I think the market here would be a lot more receptive than the market in the U.S," Kinsey said.
"But my understanding is the majority of the first part of the IPO will be done in the U.S. and later on, what is left will be distributed to Wendy's shareholders... and that's unfortunate because Canadians are much more aware of Tim Hortons," he said.
Named after its co-founder, Tim Horton, a former National Hockey League star, the chain is a national icon in Canada, with locations in almost all Canadian small towns.
"I don't think that U.S. investors know that much about it, it would be like owning a foreign stock for them," Kinsey said, adding that at some point, Canadian investors will end up with most of the company's shares.
"But that could take some time, especially if Wendy's distributes the latter part of the stock to their shareholders. At that stage, we have a real good feel for it because the U.S. shareholders that will receive the stock will just sell it."
Adrian Mastracci, investment counsel and president at KCM Wealth Management Inc., said even though a lot of Canadian investors would like to own shares of Tim Hortons, the appetite in Canada for an IPO of that size may not be big enough.
"The company is well known on both sides of the border by now, and maybe Canadians have more affinity for it because they probably knew of Mr. Tim Horton to begin with," Mastracci said.
"Could it all be done in Canada? It might be a little bit of a stretch. I think Canada will have its fair share of it... But certainly the U.S. market has to be the bigger market."
Shares of Wendy's closed at a new year high of $57.49 on the New York Stock Exchange on Wednesday.
($1=$1.16 Canadian)
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