Kits Eyecare prices $55M TSX IPO

Kits Eyecare Ltd. has filed an amendement to its preliminary prospectus in connection with its proposed initial public offering (IPO) of its common shares and a secondary offering if the over-allotment option granted is exercised.

Kits Eyecare will issue 6,470,588 common shares at a price of $8.50 per share for gross proceeds of $55 million. In its initial filing, Kits Eyecare had expected to issue 4,705,883 to 5,333,334 common shares at an offering price of between $7.50-$8.50 per share for gross proceeds of $40 million.

Pursuant to the secondary offering, selling shareholders will sell up to 970,588 common shares (15% of the total number of the offered common shares) for gross proceeds of up to $8.25 million.

Kits Eyecare has applied to list its common shares on the Toronto Stock Exchange (TSX) under the symbol “KITS.”

Upon completion of the offering and the proposed pre-closing capital changes, Kits Eyecare will have 31,000,003 common shares with implied valuation of $263.5 million.

The KITS brand was established in 2018 in Vancouver by Roger Hardy along with Sabrina Liak and Joseph Thompson. Hardy, was formerly co-founder & CEO of Coastal Contacts Inc., an online and direct retailer of eyecare, that was acquired by Essilor in 2014 for $445 million.

In April 2019 Kits Eyecare acquired LD Vision Group (renamed to Kits.com Technologies Inc.) for $32.7 million in cash and $10 million in preferred and common share stock.

To fund the LD Vision acquisition, Kits Eyecare entered into a secured loan agreement with BDC Capital Inc. for $23.4 million with a repayment date of March 15, 2026. As at December 15, 2020, the aggregate principal amount outstanding under the loan was $20.4 million. The loan is subordinated to the company’s credit card liabilities and senior to any other loans and is secured by the company’s assets. Upon maturity or completion of an IPO, BDC Capital is entitled to receive a one-time bonus payment of 0.45% of the annual revenue.

Immediately following the closing of the offering and assuming full exercise of over-allotment option, Hardy, Liak and Thomson will control 8,487,723 shares (27.4%), 3,680,762 shares (11.9%), 191,962 shares (0.6%) respectively. Arshil Abdulla, Fayaz Abdulla and Shaneef Mitha, through LD Vision Group, will collectively control 10,611,766 shares (34.2%).

The underwriting syndicate is being led by Canaccord Genuity Corp. and including CIBC World Markets Inc., Scotia Capital Inc., Roth Canada, ULC, Haywood Securities Inc. and Stifel Nicolaus Canada Inc.

In addition to a 6% of commission fees to the underwriters, Kits Eyecare will pay Canaccord Genuity, the lead underwriter, a corporate finance fee of $250,000.

Sangra Moller LLP and Blake, Cassels & Graydon LLP act as legal counsel to Kits Eyecare and the underwriters respectively.

For the nine months ended September 30, 2020, Kits reported $54.93 million in revenues, $2.53 million in operating income, $0.37 million in net loss. As of September 30, 2020, Kits had 49 employees, of which 13 were employed at the head office, and 36 were employed at its distribution and fulfillment centre.

photo credit: Kits Eyecare