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A hydro tower is shown in Toronto on Wednesday, November 4, 2015. Ontario's Hydro One says it is assisting Canadian law enforcement agencies in an ongoing investigation into a possible cyber threat against the electricity distributor. THE CANADIAN PRESS/Darren Calabrese

The Canadian Press

Investment banks that underwrote Hydro One Ltd.'s $2.8-billion equity sale are taking a second stab at selling a large chunk of the shares after investors balked at the initial deal.

Last week, Ontario Premier Kathleen Wynne's Liberal government announced the bought-deal offering, selling 120 million shares at $23.25 apiece and reducing its stake in the Crown utility to 49.9 per cent.

Because of the deal terms, the province banked the cash as soon as it launched. However, weak investor demand for the issue left underwriters holding nearly half of the shares on offer.

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On Thursday, investment banks led by Royal Bank of Canada and Canadian Imperial Bank of Commerce priced the remaining shares, amounting to 42 per cent of the total deal, at $22.60 each, according to people familiar with the situation.

Assuming the sale goes well, it would come as a big relief for non-bank dealers in the syndicate, many of which lack the scale to carry such a large liability of unsold shares. However, it spells smaller fees for all investment banks involved.

Tepid demand for the original sale, which closed on Wednesday, reflected investor fatigue with Hydro One after the utility's initial public offering in late 2015 and a subsequent share issue the following spring.

It also contrasted with recent billion-dollar deals that sold quickly in the oil patch. TransCanada Corp. and Cenovus Energy Inc. are among companies that have issued shares to fund major acquisitions.

Ms. Wynne's debt-saddled government has been paring its stake in the Crown utility to raise cash ahead of an election next year, with proceeds earmarked for transit and infrastructure. The sales have so far netted the province $9-billion.

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Report on Business columnist Andrew Willis discusses the recent Cenovus and ConocoPhillips deal and Warren Buffett's strategy on share buybacks The Globe and Mail
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