FINA5502V Corporate Finance Summer-2025
Module 4: Assignment 1 – Task #3 Live Case Study
Group-24
Abdullahi Amirah,
Parvathy Krishna
Shams Syed,
Osama Massoud,
Sirika Temesgen,
Sayed Md Abu
Professor: Sana Mohsni
Date: JUNE 08, 2025
TASK 4 LIVE CASE STUDY: RAISING CAPITAL
Objective: to present the firm’s IPO and describe the different sources of financing [15
MARKS]
1. IPO Overview
Date of the IPO and the Stock Exchange Involved:
Linamar Corporation went public in 1986, trading on the Toronto Stock Exchange (TSX) under the ticker
symbol "LNR.T."
Offering Price of the IPO:
The offering price for the IPO was set at CAD 10.00 per share.
Closing Price of the IPO on the First Day of Trading:
On its first day of trading, Linamar’s stock closed at CAD 12.00 per share.
IPO Underpricing:
The IPO underpricing can be calculated as follows:
12.00−10.00 2.00
IPO Underpricing= = =20 %
10.00 10.00
Market Value of the Firm at the IPO Date:
At the IPO date, assuming Linamar issued 1 million shares, the market capitalization (market value of the
firm) would be:
Market Value = (Number of Shares) (Closing Price) = 1,000,000 x 12.00 = CAD 12,000,000.
Identity of the Underwriters:
The lead underwriters for Linamar Corporation's initial public offering (IPO) included major investment
firms such as BMO Nesbitt Burns and First Boston Canada.
Market Reception:
The market reception to Linamar's IPO was generally positive, as reflected in the significant opening-day
price jump and overall market interest due to the firm’s strategic positioning within the automotive parts
manufacturing sector. Investors were optimistic about Linamar’s growth potential, seeing the initial
offering as a strong entry point into a burgeoning market segment. The positive sentiment and strong
demand for shares contributed to the stock's higher opening-day closing price.
2.
Qn 2 Part 1
Linamar employed several debt and equity financing activities over the past 5 years as noted in the annual
reports from 2019-2024. Linamar raised 320 million EURO (~$494 million CAD) at an interest rate of
1.37% paid biannually for a term of 10 years in 2021 through a long-term debt to large institutional
investors. The company used the funds to repay a previous, non-revolving loan in the amount of $572
million CAD that was nearing maturity in 2021. Through a denomination involving Euros, this debt acts
as a hedge and immunizes Linamar from European currency fluctuations. Additionally, various terms and
revolving credit facilities are being used by Linamar to manage its financing needs. Specifically, a non-
revolving term loan of $572 million that matured in 2021 was repaid using the long-term debt while
another non-revolving term loan of $1.2 billion used for corporate needs is having a balance of
$25million in 2021 after two repayments of $400 million and $225 million that happened in 2020 and
2021 respectively. Linamar also has a flexible credit line of up to $1.15 billion dollars, and it would have
expired in 2023. Linamar has long-term leases appearing as liabilities on its balance sheet in the amounts
of $65.8 million and $59.3 million in 2020 and 2021 respectively. Linamar received interest-free loans
from the Canadian government's innovation programs such as the Technology Partnerships Canada loan
with an outstanding balance of $1.7 million that was repaid during 2013-2023 and Automotive Innovation
Fund with an outstanding balance of $75.7 million in 2021 with multi-year repayment schedules.
Linamar exercises equity financing through stock options as 491876 shares with a proceed of $9.5 million
was issued in 2020 and no options were exercised in the following year. Interestingly, Linamar
repurchased and cancelled some of its shares as it bought back 280 674 and approved a plan to buy up to
4.4 million shares in 2021 as repurchasing reduces circulation and signals financial strength and
shareholder value.
Linamar did not conduct any rights issues, general cash offerings or convertible debt issues during the 5-
year period from 2019 to 2024. In 2023, Linamar issues $550 million CAD as senior unsecured notes
through private placement with the goal of acquiring another business and for general corporate needs. In
2024, it secured a term credit agreement of $700 million to fund another strategic acquisition aimed at
ongoing and systematic growth.
2. Issues of Debt and Equity
Over the last five years (2019–2024), Linamar Corporation has been implementing a targeted growth
through acquisition strategy that is financially supported by private debt placements, term loans, and
equity financing. These financing tools were crafted as long-term debts that sought to increase value
while spending on acquiring EVs and agribusinesses, in addition to accomplishing disciplined share
buyback programs. The company’s slow pace of share capital creation shows a strong credit profile and a
commitment toward optimized capital structure.
2. Debt Financing Activities (2019–2024)
During the past five years Linamar used debt financing to fuel its expansion goals while keeping
operational flexibility and controlling large capital requirements through equity preservation. A major
accomplishment occurred when Linamar completed a €320 million Euro-denominated private placement
in 2021 at 1.37% interest for ten years. Linamar utilized this funding opportunity to replace its maturing
CAD $572 million term loan while obtaining attractive European interest rates that simultaneously
secured currency protection for its European businesses.
The company issued CAD $550 million worth of senior unsecured notes in 2023 to fund both the Dura-
Shiloh’s Battery Enclosures business acquisition and corporate needs. Linamar pursued its acquisition
strategy by obtaining a CAD $700 million term credit agreement during 2024 to buy Bourgault Industries
and expand its agricultural machinery segment.
Linamar has chosen non-dilutive government loans through Technology Partnerships Canada and
Automotive Innovation Fund programs to access debt instruments with interest-free repayment terms
spanning multiple years. These loans helped support research and development activities as well as
innovation projects and manufacturing operations. Linamar's debt management approach demonstrates its
disciplined strategy to achieve long-term growth while maintaining risk control and optimizing capital
structure costs.
Key Observations:
Debt Focus: 94% of capital raised via debt (CAD 1.744B), primarily for strategic
acquisitions.
As shown in Figure A1 in the Appendix, debt accounted for the vast majority of capital raised
between 2019 and 2024 .
Year Type of Issue Details Proceeds & Use
Used to repay a CAD $572 million
Private Placement – €320 million (~CAD non-revolving term loan maturing
2021 Euro-Denominated $494 million), 1.37% in 2021. Also served as a natural
Senior Notes interest, 10-year term hedge against Euro currency
exposure.
Funded the acquisition of Dura-
CAD $550 million,
Private Placement – Shiloh’s Battery Enclosures
2023 5.96% interest, maturing
Senior Unsecured Notes business and supported general
in 2033
corporate operations.
CAD $700 million in Used to finance the acquisition of
2024 Term Credit Agreement three tranches, final Bourgault Industries and general
maturity in 2027 corporate purposes.
Repayment of $400M
and $225M installments Reduced outstanding debt burden to
2020–2021 Loan Repayments
on a $1.2B corporate $25M by 2021.
term loan
Technology Partnerships
Supported R&D; balance of
Government Innovation Canada and Automotive
Ongoing $75.7M in 2021; long-term
Loans (Non-Dilutive) Innovation Fund,
repayment terms.
interest-free
Equity Financing Activities (2019–2024)
The company has used equity financing only strategically during the past five years to maintain investor
confidence while developing its internal value creation. The company distributed 491,876 shares to
employees during option exercises in 2020 to raise CAD $9.5 million. The minimal equity issuance
allowed Linamar to obtain capital and strengthen its employee incentive framework.
In 2021 Linamar executed a Normal Course Issuer Bid (NCIB) program to repurchase 280,674 shares
while obtaining permission to acquire up to 4.4 million shares. Through such share buyback programs,
the company achieves three benefits: it reduces outstanding shares while increasing EPS and
demonstrates its confidence in future performance. During the 2019–2024 period Linamar did not issue
rights offerings or general public equity or convertible securities because the company focused on
performance-driven capital strategies with minimal dilution.
The company achieved financial stability through reduced equity dilution while using internal cash flows
to maintain shareholder value delivery. The company's cautious approach to equity markets demonstrates
both strong operational performance and its ability to seek alternative financing solutions.
As shown in the snapshot below, the financial details are summarized visually.
Year Type Details Proceeds & Use
Raised approximately CAD $9.5
2020 Stock Options Exercised 491,876 shares issued million to support working capital or
general use.
280,674 shares Enhanced earnings per share and
Share Buyback Program repurchased; board signaled strong balance sheet health.
2021
(NCIB) approved repurchase of No rights issues or public equity
up to 4.4M shares offerings during this period.
Annual capital-raising trends are clearly illustrated in Figure A2 in the Appendix, showing a
sharp increase in financing activity from 2021 to 2024 aligned with Linamar’s acquisition
strategy.
Strategic Insights
High reliance on debt: Linamar employed long-term debt (94% of capital) for acquisitions due
to favorable rates and extended maturity.
Minimal dilation: Preserved shareholder value as only $9.5M was raised from stock options.
Flexible structure Permitted private placements of shares that let Linamar avoid regulations and
maintain confidentiality.
Smart capital use: Each major debt issue increased in tandem with strategically defined business
expansion from EV components (Dura-Shiloh) to agriculture (Bourgault).
ESG Support: Acquisitions are aligned with Net-Zero targets and are supported by
Sustainalytics ESG ratings and DBRS credit strength (BBB).
Conclusion:
Linamar Corporation's capital strategy from 2019-2024 timeframe is calculated with low risk
exposure. It avoided issuing public equity and instead relied on debt, self cash flow, and equity
preservation. The funds obtained were utilized to enhance prominence and position as a leader in
EV manufacturing and agricultural machinery while maintaining strong credit along with ESG
profile.
Sources & Citations
1. TSX Historical Data (Linamar IPO pricing, 1986)
2. Linamar Corporation Annual Reports (2021–2024)
3. DBRS Morningstar: Credit rating report (May 2023)
4. Sustainalytics: ESG Risk Rating (2024)
5. Canadian Net-Zero Emissions Accountability Act (2021)
APPENDIX:
Figure A1: Capital Structure of Linamar Corporation (2020–2024)
This pie chart illustrates the proportion of capital raised through debt (94%) and equity
(6%) over a five-year period. Linamar's funding strategy demonstrates a strong preference
for long-term debt financing while minimizing equity dilution to preserve shareholder
value.
Figure A2: Annual Capital Raised by Linamar Corporation (2020–2024)
In these paragraphs, we shall consider describing the bar chart which shows how much capital
Linamar earned from year 2020 to 2024. It shows that in the year of 2020; Linamar stock option
exercises raised about CAD 9.5 million. Starting from the year 2021, Linamar International
Incorporated had an increase in capital through debt financing as well as large scale operations.
This includes a 2021-issued bond of CAD 494 million (equivalent to €320 million). In 2023,
Linamar raised more capital through unsecured CAD 550 million notes. In the year 2024, it
entered a term credit facility of CAD 700 million. This money was spent on refinancing
obtainable debt and other strategic debt realignment in the acquired sectors of electric vehicles
and agricultural machinery. The chart also demonstrates that the corporation is rapidly adopting
dilutive growth financing in a bid to enhance expansion and minimize dilution equity ratio
impacts on the shareholders.
