Key question is: why are the founders looking to exit Roots now, says money manager
Investors will soon have a chance to own a piece of Roots.
The iconic Canadian retailer, whose roots date back to 1973, on Wednesday filed paperwork for an initial public offering on the Toronto Stock Exchange under the ticker symbol ROOT. The preliminary paperwork doesn't indicate the number of shares that will be sold, or at what price.
The decision to go public comes almost two years since company founders Michael Budman and Don Green brought in private equity firm Searchlight Capital Partners as a majority investor.
The retailer won't receive any proceeds from the IPO, which is structured as a secondary offering by Searchlight and an investment vehicle controlled by Budman and Green.
Roots earned $8.2 million in fiscal 2016 on $281.9 million in sales, according to financial statements released with the prospectus. The retailer is aiming to boost its sales to as much as $450 million by fiscal 2019 with a growth strategy that spans the globe.
In Canada, Roots is aiming to more than double its investment in marketing to four per cent of sales by the end of fiscal 2019. It's also targeting as many as 33 stores for renovation or expansion, as well as up to 10 new stores over the same time horizon.
In the United States, Roots is hinting at expansion in the northeast and midwest parts of the country, including potentially opening stores in Boston, Detroit, Philadelphia, Washington and Chicago.
Roots also wants to export its brand to new international markets. Beyond its existing footprints in Taiwan and China, the company said it plans to work with its partner in those countries to help set up shop in Singapore and Malaysia by the end of fiscal 2019. Twelve other unnamed markets are being contemplated for expansion in the future.
As of the end of July, Roots had 116 stores in Canada, four in the U.S., and 136 others operated by a partner across Taiwan and China.
Roots states in the IPO paperwork it has no immediate plan to pay dividends to its shareholders; instead, it will focus on funding its growth.
TD Securities, Credit Suisse Securities Canada and BMO Capital Markets are lead bankers on the IPO.