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Fast-food chain Freshii prepping a fall IPO

Canadian quick-service restaurant chain Freshii is preparing to go public, a deal that is scheduled to launch this fall and build on the success of Aritzia's recent initial public offering.

For a full year there has been chatter that Freshii wanted to pursue an IPO. The company, however, was in a tough spot because it isn't big enough to garner mass attention in the United States, where it initially wanted to list, and the Canadian IPO market all but died in 2016.

However, there are finally signs of life in Canada, fuelled by Aritzia Inc.'s recent IPO, whose size was increased by 25 per cent to $400-million on the back of heavy investor demand. That, coupled with Freshii's desire to go public, is giving investment bankers the confidence to launch a deal in Canada, according to people familiar with the offering.

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The plan is to launch the IPO by year-end, but the company likely plans to wait until after the U.S. presidential election so that investors can fully absorb the results. Early estimates suggest Freshii will try to raise $100-million, and hopes to value the company around $500-million. Final figures will depend on investor appetite.

Related: Freshii's founder aims to kill fast-food rivals with kale

A spokesperson for Freshii declined to comment, stating the company does not weigh in on capital raises.

Freshii is well-situated in the booming sector of fresh, fast food chains such as Chipotle Mexican Grill Inc. Food courts in Canada have also seen the explosion of chains such as iQ Food Co., famous for its healthier takeout boxes full of organic quinoa and shredded red cabbage, and Kupfert & Kim, which specializes in wheatless, meatless dishes.

Freshii, which is now in 75 cities and 15 countries, was built largely with private money, including the backing of Klass Capital, which invested in 2010. Private backers usually prefer to exit within five to seven years.

Lately, Freshii's outspoken CEO has looked to drum up public attention, appearing on channels such as CNBC, Fox Business and Business News Network.

Although Freshii is looking to launch its IPO, many factors could derail its plans, including the growing list of companies that want to get in the market first. There is a backlog of IPO candidates that are salivating to market to investors, all of whom have seen Aritzia's recent success and want to replicate it. The Canadian market can only handle so many deals at once.

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Until recently, there was a dearth of IPOs in Canada this year, largely driven by one bad experience in the first half of 2016. In May, mortgage company MCAP Corp. filed for a $275-million offering, and the deal was initially viewed as a slam dunk amid a hot housing market. By late June, that narrative had changed, and the deal was pulled the week after Britain voted to leave the European Union because investors turned skittish.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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