MONTREAL — Dollarama (TSX:DOL) says one of its major shareholders has agreed to sell about half of its holdings in the company for $324.8 million, cashing in on the discount retailer’s success on the stock market since it went public last year.
The Montreal-based retailer, which will not receive any money from the secondary sale of its shares by Bain Capital, announced after markets closed Wednesday that a syndicate of underwriters would pay $29 per share.
That’s just below the closing price of $29.08 on the Toronto Stock Exchange and the all-time high of $30.10 for the stock earlier in the session after the company’s latest quarterly report beat analyst estimates.
Dollarama’s stock went public 14 months ago in one of last year’s most notable IPOs, opening at $18.45 on Oct. 9, 2009.
Dollarama said Bain will sell at least 11.2 million shares to the syndicate led by RBC Capital, CIBC World Markets and Scotia Capital, leaving Bain with about 10.8 million shares or 14.8 per cent of Dollarama’s total common stock.
The underwriters also have the option to buy an additional 1.68 million shares from Bain within 30 days at the same price.
The company said earlier Wednesday that it will accelerate store expansion next year, particularly in Western Canada, as it continues to build the leading Canadian discount chain.
The company plans to add 50 stores in 2011 with one-third to 40 per cent of the growth being focused in Western Canada. That follows some 45 stores added in the past year, mostly in Ontario.
“With the penetration rate we have in Quebec, 900 to 1,000 stores doesn’t seem to be a problem,” Larry Rossy, CEO of the chain which currently has more than 600 stores, said Wednesday.
However, Rossy wouldn’t say if that is the ultimate size the chain hopes to one day reach. Much depends on available locations and market opportunities.
But Dollarama (TSX:DOL) said its business model, which limits prices to $2, means it can’t expand as much as some U.S. players which offer a broader range of products valued up to $20.
Much of the growth out West will be in free-standing big box locations. While it will add some larger stores elsewhere, the decision about size will be made on a store-by-store basis, Rossy said.
Dollarama said its profits surged to $31.3 million in the third-quarter as the discount retailer’s sales increased 13.7 per cent and expenses were tightened.