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Jose Boisjoli, president and CEO

CEO Jose Boisjoli has spent the last decade overseeing the transformation of the business and its portfolio

BRP’s initial public offering (IPO) in May came about five years later than originally planned. But the ‘DOO’ symbol has become an instant darling of Canadian investors and financial analysts. The IPO was by far the most successful this year, accounting for about a third of all money raised in IPOs on the Toronto exchange. DOO share prices rocketed 16 per cent in its first day of trading.

The IPO sold 12.2m shares, raising about C$262.3m. An over-allotment option for an additional 1.83m shares added C$39.3m. By late July, DOO had moved from C$18.50 per share to almost C$27. Financial analysts who started coverage expect the stock to rise anywhere from C$29 to C$35. All gave it an ‘Outperform’ rating.

The company has come a long way since Bombardier Inc spun it off in 2003 to Boston-based Bain Capital and members of the Bombardier and Beaudoin family (calling themselves the Beaudier Group). Under Bombardier, the recreational products division was considered a glitzy but distant relative whose financial performance was in no way critical to the health of the parent. Bombardier Inc had much larger earners, and potentially much bigger issues, with its aviation and transportation businesses.

Game change

But when Bain (which bought a 50 per cent stake), the Beaudiers (35 per cent) and pension fund Caisse de dépôt et placement du Québec took ownership, BRP was on its own. From the outset, taking the company public was the new owner’s goal, since Bain typically owned companies for about five years before moving on. BRP had been moving toward that goal – divesting its industrial products division, investing in new products and tweaking manufacturing – when the 2008 financial crisis derailed its plans.

“The crisis made the timing poor,” says Pierre Pichette, BRP’s vice president of communications and public affairs. “But we knew we had a good investment proposition, so we waited. When the timing was right, we decided to go ahead.”

Five years after the IPO was intended, BRP was listed in what was arguably not an IPO-friendly period on the Toronto exchange. Tim Horton’s, a coffee shop chain with a wide presence in Canada and the United States, held an IPO just a month earlier that flopped.

BRP is certainly a very different corporation than it was in 2003, when most of its revenues came from North American sales of its Sea-Doo and Ski-Doo brands. Its ATV and Evinrude brands were gathering momentum, with Evinrude just launching its E-TEC outboards. The company was also planning to launch other product categories but a two-product, two-season business model dominated revenues. While BRP built Rotax engines in Austria, and Evinrudes in the US, the bulk of manufacturing remained in the provincial town of Valcourt (Quebec), where Joseph-Armand Bombardier built his snowmobile company in 1942.

 

NOTE: This is an excerpt from the country report included in the August-September issue of IBI magazine. IBI Plus subscribers can read the complete report from the IBI Plus website.