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Canadian M&A Market Recap: Week Ended April 7

  • Posted By: Karen Fisman, Louis Goldberg, Yingxi Liao, Chris Angelatos and Paris Aden

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Market Update

Eighty-six Canadian M&A transactions were announced this past week. Year to date, M&A deal count is 13.3% higher than the comparable period in 2016. The Canadian dollar depreciated by 0.38 cents, ending the week at 75 cents. The TSX rose by 0.3% and outperformed the S&P 500 by 0.6% in U.S. dollar terms.

Global M&A activity in Q1 2017 was mixed with total deal value increasing 8.9% to $678.5 billion and total deal count falling by 17.9%. The increase in average deal value marks a reversal of the global trend towards increasing mid-market deal activity that characterized 2016. In Canada, however, mid-market deal activity is still going strong.

The new issue environment for U.S. middle market loans remained tighter relative to last month, with average total leverage of 4.3x EBITDA compared to 4.9x at the beginning of March. New issue clearing yields were 0.44% lower than last year’s levels.

Insight Article: Canadian Oil and Gas: Challenges, Solutions and an Optimistic Outlook

Last week yielded a blockbuster deal in the Canadian oil patch:  Cenovus Energy announced the acquisition of ConocoPhillips Co.’s oil sands assets for the mega price of C$17.7 billion.  The deal arrived on the heels of Canadian Natural Resources Ltd.’s C$11.1 billion acquisition of oil sands assets from Royal Dutch Shell Plc, and reflects the ongoing oil sands consolidation by major Canadian companies.

This activity is consistent with findings in a recent Mergermarkets/Tory’s report relating to expectations for the Canadian Oil and Gas sector in 2017.  Respondents to the survey were optimistic about deal activity for the current year, with 67% expressing a belief that volume would increase. 

 

 

 

 

 

 

 

There are two challenges likely to drive Canadian M&A through 2017:

1.      Lower commodity prices;

2.      Regulatory pressure to reduce emissions[1].

In order to address both of these challenges, Exploration and Production (“E&P”) companies are looking to new technologies to reduce costs and emissions.  Schlumberger’s 2016 acquisition of the coiled tubing assets from Calgary-based Xtreme Drilling and Coil Services serves as an example.  The deal was done for the specified purpose of increasing operational efficiency.  With the persistence of commodity price uncertainty, we expect to see more of this activity through 2017.  As is noted in a recent McKinsey article, Preserving the Downturn’s Upside, cost savings created through operational efficiencies are most likely to be sustainable in the long term, a clear motivator in a world of uncertainty.

A further consequence of sustained, lower commodity prices is an increase in plans for divestment, particularly amongst junior E&P companies that are typically facing higher levels of debt and reduced cashflow.  As luck would have it, this heightened intent to divest marries seamlessly with the plans of senior E&P’s to focus on growth through acquisition.

With senior E&P’s likely to be busy on the deal front, how will those acquisitions be funded?  Now that oil prices are hovering in the US$45-55 range, banks are more comfortable to lend to the sector and unsurprisingly, more respondents expect to look to the debt market in 2017 over the previous year (37% compared to 28%).  Additionally, we can’t forget about the significant private equity (PE) dry powder… and neither have the oil companies.  Forty-four percent of respondents expect to look to PE investors for financing in 2017.  

So there you have it.  With relatively stable oil prices, albeit at lower levels than the soaring US$100+ from years gone by, we see a rational optimism about deal activity in the coming months.  There is the harmonious combination of intent to divest and acquire, and most significantly, a need to engage in acquisitions to reduce operating costs and carbon emissions.  It’s been a positive start to the year for the Canadian Oil & Gas sector, and we expect more of the same to come.

 

Announced Deals

Triple M Housing to Acquire Britco Manufacturing

Triple M Housing Ltd., a Canadian integrated housing construction company, has agreed to acquire Britco Manufacturing, a Canadian company that specializes in building off-site modular hotels, townhouses, affordable housing complexes, apartment buildings and offices. Total transaction value is estimated to be $6.7 million.

Diamond Estates Wines & Spirits to Acquire The Kirkwood Group

Diamond Estates Wines & Spirits Inc. (TSXV:DWS), a Canadian company that produces, markets, and exports wines globally, has agreed to acquire The Kirkwood Group Ltd., a Canadian marketing agency for wines, spirits, ready-to-drink products, and beers. Total transaction value is estimated to be $4.4 million.

Cambridge Energy Group to Acquire New Global Acreage Resources

Cambridge Energy Group Limited, a Bermuda company that engages in exploration, development, and production of natural gas, has agreed to acquire New Global Acreage Resources Ltd., a Canadian company that does not have significant operations. No transaction terms were released.

Al Anwar Holdings to Acquire The Canadian Innovation Company for Education Services

Al Anwar Holdings SAOG (AAIT:MUS), an Oman-based private equity firm specializing in providing growth capital, PIPES and buyouts in growing sectors and emerging economies, has agreed to acquire The Canadian Innovation Company for Education Services, a Canadian company that operates an international school in Muscat. Total transaction value is estimated to be $15.1 million.     

OMERS Private Equity to Acquire Inmar

OMERS Private Equity, a Canadian private equity firm, has agreed to acquire Inmar, Inc., an ABRY Partners and New Mountain Capital backed American technology company that owns and operates intelligent commerce networks. No transaction terms were released.

Select Sands to Acquire Newport Rail Loading Facility

Select Sands Corp. (TSXV:SNS), a Canadian company that engages in the acquisition and exploration of mineral properties, has agreed to acquire Newport Rail Loading Facility, LLC, an American company that provides rail loading services. Total transaction value is estimated to be $2.7 million.

CGX Life Sciences to Acquire IMT

CGX Life Sciences Inc., a Canadian company that sells CinG-X supplements used to reduce blood sugar and support cognitive functions, has agreed to acquire IMT, LLC, an American company that cultivates, produces, and sells cannabis and cannabis-infused products. Total transaction value is estimated to be $5.1 million.

Valens Groworks to Acquire Royal Green Acres Manufacturing

Valens Groworks Corp. (CNSX:VGW), a Canadian biotechnology company focused on researching phytopharmaceutical material used in producing cannabis and cannabis related products, has agreed to acquire Royal Green Acres Manufacturing Ltd., a Canadian company that manufactures medical marijuana products. Total transaction value is estimated to be $2.7 million.

Minecorp Energy to Acquire BOE Oil Tools

Minecorp Energy Ltd. (TSXV:MCE), a Canadian junior exploration stage mining company focused on metallurgical coal and oil and gas projects in North America, has agreed to acquire BOE Oil Tools Inc., a Canadian company that provides custom engineered technical products, solutions, and services for operators in the oil and gas industry. Total transaction value is estimated to be $873 thousand.

CVC Capital Partners to Acquire Compania Logistica de Hidrocarburos CLH

CVC Capital Partners, a Luxembourg-based private equity firm, has agreed to acquire Compania Logistica de Hidrocarburos CLH SA, an Ardian, AMP Capital Investors Limited, Deutsche Bank AG, Investment Arm, British Columbia Investment Management Corporation, PGGM, Borealis Infrastructure Trust, Credit Suisse Asset Management Limited, Alberta Investment Management Corporation, Kartera I SI, and Pensionenfunds Zorg en welzjin backed company that engages in the storage, transportation, and delivery of oil products in mainland Spain and the Balearic Islands. No transaction terms were released.

Canopy Growth to Acquire rTrees Producers

Canopy Growth Corporation (TSX:WEED), a Canadian company that produces and sells medical marijuana, has agreed to acquire rTrees Producers Limited, a Canadian producer of premium medical marijuana and leader in cannabis research and innovation. Total transaction value is estimated to be $37.2 million.

Global Excel Management to Acquire ChargeCare International

Global Excel Management Inc., a Canadian company that provides customized medical cost-containment solutions and claims management services to clients globally, has agreed to acquire ChargeCare International Limited, a U.K. company that offers cost containment consulting and administration of medical claims in Europe. No transaction terms were released.

 

Closed Deals

eCompliance Management Solutions Acquires N4 Systems

eCompliance Management Solutions Inc., a Canadian company that provides occupational health and safety management solutions in Canada, has acquired N4 Systems Incorporated, a Canadian company that provides inspection software and safety compliance management solutions. No transaction terms were released.

McKensson Acquires GMD Distribution

McKensson Corp, an American pharmaceuticals distributor, has acquired GMD Distribution Inc, a Hammond, Kennedy, Whitney & Co backed Canadian company that specializes in supplying specialty ophthalmic pharmaceuticals to clinics. No transaction terms were released.

PartnerRe Acquires Aurigen

PartnerRe Ltd, a leading global reinsurer, has acquired Aurigen Capital Ltd, an Edgestone Capital Partners, Bregal Capital, Pine Brook Partners and Soros Strategic Partners backed Canadian life reinsurance company. Total transaction value is estimated to be $375 million.

Brookfield Asset Management Acquires a Portfolio of industrial and Office Assets from TA Realty

Brookfield Asset Management, a diversified investment asset management firm, has acquired, has acquired a portfolio of consisting of 45 industrial and office assets totaling 8.6 million square feet from TA Realty LLC, a U.S. private real estate investment firm. Total transaction value is estimated to be US$855 million.

Markel Canada Acquires Allsport Insurance Marketing

Markel Canada Limited, a Canadian company that underwrites commercial general liability, property and casualty, and specialty insurance products, has acquired Allsport Insurance Marketing Ltd., a Canadian company that provides insurance programs for sports, leisure, and recreational activities. No transaction terms were released.

Cérélia Acquires English Bay Batter

Cérélia SA, a company that produces and sells ready to bake chilled dough, has acquired English Bay Batter (Vancouver), Inc., a Canadian company that produces and supplies cookies and muffins for food service, private label, and fundraising customers. No transaction terms were released.

Citron Hygiene Canada Acquires Alpine Jan-San

Citron Hygiene Canada Limited, a Canadian company that provides washroom hygiene, pest control, chemical, and life safety services for commercial facilities, has acquired Alpine Jan-San, a Canadian company that offers commercial washroom hygiene services. No transaction terms were released.

UGE International Acquires Carmanah Solar Power

UGE International Ltd. (TSXV:UGE), a Canadian company focused on renewable energy solutions for the commercial and industrial sector, through a majority-owned joint venture with affiliates of OYA Solar Inc., has acquired Carmanah Solar Power Corp., a Canadian company that develops, integrates, and finances solar photovoltaic projects. Total transaction value is estimated to be $2.7 million.

Yelp Acquires Turnstyle Solutions

Yelp Inc. (NYSE:YELP), a American company that connects people with local businesses globally, has acquired Turnstyle Solutions, Inc., a Canadian 500 Startups backed company that provides location based marketing solutions and consumer analytics for bricks and mortar retail stores. Total transaction value is estimated to be $26.8 million.

Calabrio Acquires Symmetrics Business Intelligence Solutions

Calabrio, Inc., an American company that develops and markets customer engagement and workforce optimization software solutions for the contact center market, has acquired Symmetrics Business Intelligence Solutions Inc., a Canadian company that designs, develops, and markets software solutions for call center data analysis and reporting. No transaction terms were released.

Perseus Operating Group Acquires Dealer Information Systems

Perseus Operating Group, a subsidiary of Constellation Software Inc. (TSX: CSU), has acquired Dealer Information Systems Corporation, an American company that provides business system software to agricultural, construction, and material handling dealers and distributors in North America. No transaction terms were released.

Ag Growth International Acquires Global Industries

Ag Growth International Inc. (TSX:AFN), a Canadian company that manufactures and distributes grain handling, storage, and conditioning equipment globally, has acquired Global Industries, Inc., an American company that manufactures and sells grain storage and handling equipment, metal buildings, and water treatment systems for customers worldwide. Total transaction value is estimated to be $134 million.

Gestev Acquires Wasabi Atelier Expérientiel

Gestev Inc., a Canadian company that provides sports, cultural, and corporate event organization services, has acquired Wasabi Atelier Expérientiel Inc., a Canadian company that provides marketing services. No transaction terms were released.

Sierra Wireless Acquires GlobalTop Technology

Sierra Wireless, Inc. (TSX:SW), a Canadian company that engages in building the Internet of Things (IoT) with intelligent wireless solutions globally, has acquired GlobalTop Technology Inc., a Taiwanese company that designs and manufactures positioning modules for industrial, consumer, and automotive sectors. Total transaction value is estimated to be $3.2 million, implying a 0.48x revenue multiple.

Hyduke Energy Services Acquires Avalanche Metal Industries

Hyduke Energy Services Inc. (TSX:HYD), a Canadian integrated oilfield services company that manufactures, distributes, and repairs oilfield equipment and supplies worldwide, has acquired Avalanche Metal Industries Ltd., a Canadian company that manufactures structural steel products. Total transaction value is estimated to be $535 thousand.

Colliers International Group Acquires Welsh Companies

Colliers International Group Inc. (TSX:CIGI), a Canadian company that provides commercial real estate services to corporations, financial institutions, governments, and individuals worldwide, has acquired Welsh Companies, LLC, an American company that provides commercial real estate services. No transaction terms were released.

Beringer Capital Acquires Blue Acorn

Beringer Capital, a Canadian private equity firm, has acquired Blue Acorn, Inc., an American company that designs, develops, markets, and optimizes e-commerce solutions. No transaction terms were released.

Dilawri Group of Companies Acquires Cadillac Chevrolet Buick GMC du West Island

Dilawri Group of Companies, a Canadian automotive group that owns and operates automotive dealerships in Ontario, Saskatchewan, Alberta, and British Columbia, has acquired Cadillac Chevrolet Buick GMC du West Island Ltée, a Canadian car dealership. No transaction terms were released.

Alithya Group Acquires Systemware Innovation

Alithya Group Inc., a Canadian company that provides information technology and management consulting services, has acquired Systemware Innovation Corporation, a Canadian company that provides technology consulting services for nuclear, financial, energy, and transportation industries. No transaction terms were released.

Miguel Torres, Acquires Amphora Vins Fins et Spiriteux

Miguel Torres, S.A., a producer and marketer of wine and brandy products, has acquired Amphora Vins Fins et Spiriteux, a Canadian company that distributes wines and spirits. No transaction terms were released.

Sproule Associates Acquires Niven Fischer Energy Services

Sproule Associates Limited, a Canadian petroleum consulting company that provides upstream petroleum engineering, geological, geophysical, and petrophysical consulting services, has acquired Niven Fischer Energy Services Inc., a Canadian company that offers technical, advisory, and administrative support to upstream petroleum industry. No transaction terms were released.

RediShred Capital Acquires NoVA Shredding

RediShred Capital Corp. (TSXV:KUT), a Canadian company that manages document shredding business franchises, has acquired NoVA Shredding LLC, an American company that offers paper shredding services. No transaction terms were released.

Dye & Durham Acquires OnCorp Direct

Dye & Durham Corporation, a Canadian company that offers a suite of legal products and services in Canada and the U.K., has acquired OnCorp Direct, Inc., a Canadian electronic filing intermediary company that provides electronic access to Ontario's record of business information. No transaction terms were released.

Eacom Timber Acquires Anthony-EACOM

Eacom Timber Corporation, a Canadian company that, together with its subsidiaries, engages in the manufacture, marketing, and distribution of lumber, wood chips, and wood-based value-added products in North America, has acquired Anthony-EACOM Inc., a Canadian manufacturer of power joist flange I-joists in Sault Ste. Marie. No transaction terms were released.

Foxconn Technology Group Acquires Smart Technologies

Hon Hai Precision Industry Co., Ltd. (TSEC:2317) d.b.a Foxconn Technology Group, a global company that engages in electronic contract manufacturing in Taiwan and internationally, has acquired Smart Technologies Inc., a Canadian company that designs, develops, and sells interactive technology products and integrated solutions worldwide. Total transaction value is estimated to be $361 million, implying a 27.3x EBITDA multiple and a 0.75x revenue multiple.

The Wicks Group of Companies Acquires EZShield

The Wicks Group of Companies, L.L.C., an American private equity firm, has acquired EZShield, Inc., an EdgeStone Capital backed company that provides identity theft protection and restoration services in the United States and Canada. No transaction terms were released.

 


 

[1] With the Paris Agreement on climate change now in force, Canada will try to reduce greenhouse gas emissions to 30% below 2005 levels by 2030.  In addition, Alberta has introduced new legislation with a broad impact on emissions reduction.  The federal government has also introduced a federal benchmark for pricing carbon emission.

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