Kinaxis eyes acquisitions in wake of IPO

Nothing was going to rain on Kinaxis’ parade after the Ottawa-based tech firm closed a successful initial public offering on the Toronto Stock Exchange this week.

The company, which sells cloud-based supply-chain management software, threw a party for its employees on Wednesday, one day after its IPO raised $100.6 million.

“It certainly met our expectations,” said Kinaxis CEO Doug Colbeth in an interview. “We’re very happy. It’s a milestone.”

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Nothing could dampen his or his employees’ spirits – not even the wet weather during Wednesday’s outdoor celebration.

“We were smart enough to rent a tent,” Mr. Colbeth told OBJ with a chuckle on Thursday. “I told people yesterday we could enjoy (the IPO) for 24 hours. Now we get back to work.”

The company, which is now trading under the symbol “KXS,” sold five million common shares at a price of $13 per unit for a total of $65 million before underwriting fees and expenses were deducted. That could rise to $80.1 million if the over-allotment option is exercised in full.

Additionally, two of its existing shareholders – venture capital funds HarbourVest Partners from Boston and Alberta Trust of Montreal – sold 2,739,715 common shares for a total of $35.6 million. They retain a 30 per cent ownership stake in the company.

Mr. Colbeth said Kinaxis plans to use the proceeds of the IPO to pay down US$30 million in debt and strengthen its balance sheet.

“That allows for various activities, including some potential small acquisitions,” he said, adding the company might look at acquiring other firms “if we see some opportunities that make sense for the business.”

Many of Kinaxis’ clients are major corporations such as Ford Motor Co., Mr. Colbeth said, and having a strong balance sheet is a key to securing them to long-term deals.

“They want suppliers they know are going to be around a long time,” he said. “Really, the only way for them to know that is to see your financials. We wanted those financials to show no debt.”

An IPO also helps the company from a marketing perspective, he added.

“You create a buzz where people talk about you,” Mr. Colbeth said.

Mr. Colbeth said the company chose to list on the TSX because it felt it would get better coverage from analysts by staying in Canada rather than debuting on the Nasdaq. The company will probably list on both exchanges eventually, he added.

Kinaxis, which was incorporated in 1996, has experienced significant growth over the past couple of years, with revenue increasing from $38 million in 2011 to $60.8 million in 2013, according to a prospectus filed before the IPO.

The company reported a net loss of $9.7 last year. For the first quarter of 2014, it had revenue of $15.6 million and a net income of $2 million.

BMO Capital Markets and Canaccord Genuity co-led the offering, with TD Securities, RBC Dominion Securities, National Bank Financial, CIBC World Markets and Cormark Securities making up the remainder of the underwriters syndicate.

Kinaxis shares were holding steady at $13 in Thursday afternoon trading.

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