Neighborly Pharmacy Inc., Canada’s third-largest drugstore chain operator, has filed preliminary documents for a $ 150 million initial public offering on the Toronto Stock Exchange.
Neighborly, which until recently was known as Rx Drug Mart, has 145 branches across the country. The company plans to list on the Toronto Stock Exchange during the week of May 24. Its shares are expected to trade between $ 13 and $ 17, and the company has applied for listing under the symbol NBLY.
Neighbourly is owned by Persistence Capital Partners, a private equity fund that invests in Canadian healthcare companies.
Two-thirds of Neighbourly’s pharmacies are located in communities of less than 100,000 people, and the majority of income comes from the sale of prescription drugs rather than “first-sell” items like food and cosmetics.
“These communities are generally underserved and subject to less intense competition,” the company said in a prospectus. “As such, our pharmacies may be able to provide a wider range of patient services, while generating higher margins than in dense urban centers where competition is stronger.”
Founded in 2015, the company has grown through single-store and multi-store acquisitions. He plans to use the IPO proceeds to acquire more independent pharmacies in what he sees as a fragmented Canadian market. The company estimates that 6,500 Canadian pharmacies, or 60 per cent. 100 of Canadian pharmacies are independent and consider 3,600 of these pharmacies to be viable acquisition targets. He also said he expects incomes to increase as Canada’s senior population grows, as prescription drug use increases with age.
Neighborly estimates that it owns 1 percent of all Canadian drugstores, behind Rexall and Shoppers Drug Mart, which collectively own 16 percent. Neighborhood General Manager Chris Gardner was Vice President of National Operations at Shoppers from 2012 to 2017, according to his LinkedIn profile.
Neighbourly’s adjusted earnings before interest, taxes, depreciation and amortization have increased steadily over the past few years. In 2019, it posted adjusted EBITDA of $ 14.4 million on revenue of $ 150 million. In 2020, it achieved Adjusted EBITDA of $ 21.2 million on revenue of $ 186 million.
The company expects to have approximately $ 90.3 million in net debt outstanding after the IPO and, upon closing, will receive $ 250 million in credit facilities from a syndicate of lenders, including Bank of Nova Scotia. Scotland and the Royal Bank of Canada.
Scotia Capital Inc. and RBC Dominion Securities are the primary underwriters of the IPO, along with BMO Nesbitt Burns Inc., National Bank Financial Inc., TD Securities Inc., Desjardins Securities Inc., iA Private Management Inc. and HSBC Securities (Canada) Inc. Stikeman Elliott LLP is legal counsel to Neighborly.
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