07 December 2006

RBC Closes First Transaction on London's AIM

Financial Post, Carrie Tait, 7 December 2006

RBC Capital Markets made its first move on the Alternative Investment Market yesterday, with the Canadian brokerage listing an Australian company on the British exchange.

RBC listed Berkeley Resources Ltd. on AIM, an exchange catering to smaller companies, particularly mining and oil and gas concerns.

"We look after those companies on AIM that other markets don't really regard as that interesting," said Andrew Smith, director, global investment banking for RBC in London.

About 2,500 companies have joined AIM, which is owned by the London Stock Exchange, since it launched in 1995. Mr. Smith said about 1,650 companies currently trade on AIM.

While most of these companies have market capitalizations between $100-million and $500-million, he said the average is rising as more companies look for alternatives to U.S. markets.

Companies are gravitating toward this market in part to avoid the stiff -- and expensive -- Sarbanes-Oxley rules enforced in the U.S. in the wake of the Enron and WorldCom accounting disasters.

"The U.S. market is increasingly becoming burdensome in terms of regulatory compliance," said Gordon Bell, RBC's head of global mining and metals.

Not only are international companies such as Australia's Berkeley choosing AIM over North American exchanges, U.S. companies are also making the switch because of the high costs of regulatory demands, Mr. Smith added.

But while listing on AIM may bring down costs tied to regulatory red tape, companies will still have to pay their bankers.

The fees companies pay their bankers on AIM deals is comparable to the fees they would fork over on other exchanges, such as the London Stock Exchange.

"The amount of work we have to do for an AIM deal compared with a main board deal -- there's not a huge difference," Mr. Smith said. "You might charge a little bit extra for the main board because you have probably a month's worth of too-ing and froe-ing with the regulator to get the documents approved ... but you're talking about a small percentage of additional fees."

One of the reasons RBC brought Berkeley to the AIM was location. The uranium company is listed on the Australian Stock Exchange, but about 40% of its shareholders are in Europe. Being dual-listed increases liquidity, and also makes it more convenient for its European owners.

Further, access to cash also plays a role. Because big AIM companies would be miniscule players in the United States, the smaller market makes it easier for them to garner attention.

"Under a $200-million market capitalization -- it is very difficult to get any interest whatsoever in North America. AIM does provide interest at that smaller end, therefore companies are attracted by the fact they can raise money on AIM," Mr. Smith said.

Canaccord Adams Ltd., an independent Canadian brokerage, in 2001 became one of the first two dealers outside of the U.K. to achieve nominated advisor status. These "Nomads" carry out due diligence on AIM companies and help with their admission process.

Companies representing 12.5% of AIM's market capitalization are under Canaccord's nomadship, according to Mark Maybank, Canaccord's chief operating officer. This makes Canaccord the largest Nomad on the exchange.

A handful of other Canadian institutions are working on getting Nomad status, which RBC received in September.
The Globe and Mail, Boyd Erman, 7 December 2006

The lure of London's AIM stock market has drawn many of Canada's smaller independent brokerages with the promise of fees and underwriting business for helping companies list there, and now behemoth RBC Dominion Securities Inc. has officially joined the fray.

RBC yesterday closed its first AIM transaction, advising Australian-based uranium miner Berkeley Resources Ltd. on its new listing on the London exchange for smaller companies. On Monday, the firm won the role of nominated adviser for Amur Minerals Corp.

These are the first major AIM dealings for RBC since it formed a team in London this past summer to focus on securing work advising AIM-listed companies in the resource, energy and technology sectors. RBC sought and won the key right to act as a nominated adviser, or nomad, for listing companies, a role that involves counselling management and directors on exchange rules.

The firm nabbed bankers Andrew Smith and Martin Eales from London brokerage Collins Stewart, and Mark Naughton from Merrill Lynch, to start the group. The firm has also added a sales person and a research analyst to broaden coverage of smaller AIM-sized companies and the investors who buy AIM issues.

"We've got the complete waterfront of U.K. companies and smaller investors covered now," said Mr. Smith, who leads the team.

Until a recent slowdown in business, the AIM had been a hot destination for companies seeking a place to trade.

Firms are keen on a London listing because it offers access to the huge European investor base, and the AIM offers easier regulation for small companies.

That generated big business for Canadian firms that were the first to get their nominated adviser status, which allows brokerages to supervise listings on the London market. For example, Canaccord Capital Inc. is a nomad and broker to more than 50 AIM companies, and bills itself as the biggest AIM broker by market value of the companies it advises.

GMP Capital Trust is opening a branch in London, and boutiques Haywood Securities and Westwind Partners are already there.

RBC's Mr. Smith said his firm expects to weather the slowdown in financing on the AIM and win business through RBC's ability to market companies to investors outside London, where many of the potential stock buyers were snowed under by the blizzard of offerings earlier in the year.