NEW YORK-Group Communication Services, Canada’s second-largest specialized mobile radio operator, plans an initial public offering of common stock to help finance most of a major expansion project to deploy digital technology.
Known as CS Group, the Montreal-based company plans to spend $91 million (Canadian) to build digital dispatch networks in each of Canada’s three major population corridors: Quebec-Windsor-Sarnia; Edmonton-Calgary; Vancouver-Victoria-Lower Fraser Valley.
Ericsson Communications Inc. and Harris Canada Inc., the Canadian subsidiaries of Ericsson and Harris, are participating in CS Group’s digital dispatch networks project by making a total strategic investment of $15 million (Canadian) worth of convertible preferred shares of CS Group. The transaction is separate from the planned initial public offering of Class A subordinate shares of common stock. The Royal Bank of Canada also will provide a new credit facility to help finance the project.
The new digital dispatch networks will employ Ericsson’s EDACS (Enhanced Digital Access Communications System) ProtoCALL technology and Prism F-Time Division Multiple Access digital transmission technology. The use of digital technology will permit CS Group to increase network capacity and the quality and variety of its services, according to Robert Bourgault, chairman and chief executive officer.
The number of shares in the IPO, registered with the provincial Securities Commission in Alberta, British Columbia, Ontario and Quebec, has not yet been determined or disclosed, according to Michel Douville, a spokesman for the company. The shares will be offered to retail and institutional customers in Canada and only to institutional investors in the United States, he said. Because only institutional buyers in the United States will be able to purchase these new common stock shares, U.S. Securities and Exchange Commission Rule 144A waives the requirement for a formal SEC registration procedure in this country, Douville said.
In addition to new shares offered in this IPO, existing private shareholders who have a controlling interest in CS Group prior to the public stock sale also will offer some of their holdings simultaneously. Information was unavailable at press time as to the number of shares being offered by insiders or the proportion of these shares to new shares being sold in the IPO. However, company officials said the proportion of stock sold by insiders is small relative to the contemplated IPO.
The single largest existing stakeholder in CS Group is Capital Communications CDPQ, a subsidiary of Caisse de depot et placement du Quebec, the pension fund for citizens of that province. Capital Communications will be selling the largest number of outstanding privately held stock shares. Bourgault, the company’s CEO, also will sell some of his shares, according to a report released by CS Group.
CS Group has 14,000 subscribers, 398 channels and established analog SMR networks in the provinces of Alberta, British Columbia, Ontario and Quebec. Industry Canada recently awarded CS Group several frequencies in the 900 MHz band in each of its proposed digital coverage areas. The new digital dispatch networks will cover a population of about 20.4 million people and have a capacity of approximately 280,000 subscribers.
