UPDATE 1-Ontario to raise up to C$1.87 billion in Hydro One IPO

Fri Oct 9, 2015 4:40pm EDT
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By John Tilak and Euan Rocha

TORONTO Oct 9 (Reuters) - The Canadian province of Ontario expects to raise as much as C$1.87 billion ($1.44 billion) through the sale of a 15 percent stake in its electric utility Hydro One Ltd, according to a regulatory filing on Friday.

The government plans to sell up to 89.25 million Hydro One shares in an initial public offering likely to be priced between C$19 and C$21, pegging the overall value of the company between C$11.31 billion and C$12.5 billion.

The Hydro One offering, which comes in the aftermath of a sharp selloff in Canadian public markets over the summer, is set to raise less funds than the province had initially anticipated.

In a report in April, a special advisory council appointed by the government valued a 15 percent stake in the company at C$2.03 billion to C$2.25 billion. The report valued the entire company between C$13.5 billion and C$15 billion.

The IPO as it stands will only raise C$1.87 billion if it prices at the top end of a C$19 to C$21 a share range and if the bookrunners on the IPO tap an over-allotment option tied to the offering.

If the over-allotment option is not exercised, the offering is expected to raise C$1.54 billion to C$1.7 billion.

Despite the less-than-stellar valuation, the Hydro One IPO could one of the biggest initial public offerings in Canadian history. PrairieSky Royalty Ltd's C$1.67 billion IPO last spring is the biggest to date in the Canadian market, according to Thomson Reuters data.

Underwriters of the offering include RBC Dominion Securities , Scotia Capital, BMO Nesbitt Burns, CIBC, TD Securities, National Bank Financial , Desjardins Securities, Raymond James, GMP Securities, Barclays Capital, Goldman Sachs and Credit Suisse Securities. (Reporting by Euan Rocha and John Tilak; Editing by Diane Craft and Tom Brown)