Neighbourly Pharmacy Inc., Canada’s third-largest pharmacy chain operator, has filed preliminary documents for a $150-million initial public offering on the Toronto Stock Exchange.
Neighbourly, which until recently was known as Rx Drug Mart, has 145 locations across the country. The company expects 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 to list under the ticker symbol NBLY.
Neighbourly is owned by Persistence Capital Partners, a private-equity fund that invests in Canadian health care companies.
Two-thirds of Neighbourly’s pharmacies are in communities with populations of fewer than 100,000, and the majority of revenue is earned from sales of prescription medication, rather than “front shop” products such as food and cosmetics.
“These communities are typically underserved and subject to less intense competition,” the company said in a prospectus. “As such, our pharmacies may be able to provide a broader range of services to patients, while generating higher margins than in dense, urban centres where there is more competition.”
Founded in 2015, the company has grown through single-store and multistore acquisitions. It plans to use proceeds from the IPO to acquire more independent pharmacies in what it sees as a fragmented Canadian market. The company estimates that 6,500, or 60 per cent of Canadian pharmacies, are independent, and sees 3,600 of those pharmacies as viable acquisition targets. It also said it expects revenue to grow as the Canada’s senior population increases, since prescription drug use increases with age.
Neighbourly estimates that it owns 1 per cent of all Canadian pharmacies, behind Rexall and Shoppers Drug Mart, which collectively own 16 per cent. Neighbourly chief executive officer Chris Gardner was the 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 grown steadily in recent years. In 2019, it had $14.4-million in adjusted EBITDA on $150-million in revenue. In 2020, it earned $21.2-million in adjusted EBITDA on $186-million in revenue.
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 and Royal Bank of Canada .
Scotia Capital Inc. and RBC Dominion Securities are the lead underwriters on the IPO, along with BMO Nesbitt Burns Inc., National Bank Financial Inc., TD Securities Inc., Desjardins Securities Inc., iA Private Wealth Inc., and HSBC Securities (Canada) Inc. Stikeman Elliott LLP is Neighbourly’s legal adviser.