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Canadian Market Recap: Week Ended July 28

  • Posted By: Karen Fisman, Anwar Khan, Topher Abt, Clear Li, Chris Angelatos and Paris Aden

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Market Update

Twenty-four Canadian M&A transactions closed this past week. Year to date, M&A closed deal count is 0.9% lower than the comparable period in 2016. The Canadian dollar appreciated by 0.62 cents, ending the week at 80 cents relative to U.S. dollar. The TSX outperformed the S&P 500 by 0.4% in U.S. dollar terms. WTI Crude oil rose by 8.6%, ending the week at $49.71 per barrel.

The new issue environment for U.S. middle market loans became less favourable as average total leverage fell to 5.8x EBITDA from 5.9x last week while yields rose by 7 bps to 6.48%, a level that is 109 bps lower than a year ago. According to The Lead Left, leverage levels have peaked across most capital structures in the middle market in the first half of 2017. The “all senior” capital structure hit a new peak at 3.83 times, up from 3.79 times last year and 3.41 times in 2013, highlighting an environment of increased business confidence.

 

Valitas Insights: U.S. Middle Market, Q2/2017: Slower Growth, Sustained Appetite for M&A

Why, with our focus on Canadian mid-market M&A, are we writing about the U.S. Middle Market?

U.S. middle market companies generate 33% of U.S. private sector GDP, and as such, represent a significant economic force.  According to a recent survey conducted by the National Center for the Middle Market, 38% of middle market firms expect to engage in an M&A transaction over the next twelve months, motivated in large part by a desire to add new markets and customers.   Additionally, there is an expectation that increased revenues will be generated outside the U.S., with Canada identified as one of the top three contributing markets.

A healthy U.S. middle market with an appetite for growth through outbound M&A is likely to impact our Canadian deal activity, particularly when we layer on the discount attributed to Canadian company valuations relative to their U.S. counterparts.

So now that we’ve established why we care, let’s discuss U.S. Middle Market Q2 performance, which comes on the heels of a record setting first quarter. 

To learn more, read our full article.

 

Canadian M&A Transactions[i]

Energy (Closed)

Sumitomo has Acquired Pacific BioEnergy

Sumitomo Corporation (TSE:8053), a Japanese general trading company, has acquired Pacific BioEnergy Corporation, a Canadian producer of wood pellet fuel. No transaction terms were released.

Materials (Announced)

Cobalt Power Group to Acquire Canadian Cobalt Projects

Cobalt Power Group Inc. (TSXV:CPO), a Canadian mineral explorer, has agreed to acquire Canadian Cobalt Projects Inc., a cobalt explorer. Total transaction value is estimated to be $3.33 million.

           Blackstone Minerals to Acquire Cobalt One Energy

Blackstone Minerals Limited (ASX:BSX), an Australian gold and nickel explorer, has agreed to acquire Cobalt One Energy Corporation, a Canadian cobalt and nickel explorer. Total transaction value is estimated to be $6.59 million.

West Fraser Timber Co. L to Acquire Gilman Companies

West Fraser Timber Co. Ltd. (TSX:WFT), a Canadian producer of lumber products sold across North America, has agreed to acquire Gilman Companies, a U.S.-based operator of six sawmills and a finger joint mill in Florida and Georgia. Gilman Companies is a subsidiary of The Howard Gilman Foundation. Total transaction value is estimated to be $538 million, implying a 6.4x EBITDA multiple.

Consumer Discretionary (Closed)

Beattie Communications Group has Acquired Beattie Tartan

Beattie Communications Group Ltd., a U.K.-based public relations and digital agency, has acquired Beattie Tartan, a Canadian provider of marketing and communications services. No transaction terms were released.

Consumer Staples (Announced)

           Otsuka Pharmaceutical to Acquire Daiya Foods

Otsuka Pharmaceutical Co., Ltd., a Japanese global healthcare company, has agreed to acquire Daiya Foods Inc., a Northwood Ventures and Stockton Road Capital backed Canadian producer of non-dairy cheese products and dairy alternative food items. Total transaction value is estimated to be $405 million, implying a 5.1x revenue multiple.

Healthcare (Announced)

Creso Pharma to Acquire Mernova Medicinal

Creso Pharma Limited (ASX:CPH), an Australian developer of cannabis and hemp based nutraceutical products for human and animal health, has agreed to acquire Mernova Medicinal Inc., a Canadian producer of medicinal cannabis. Total transaction value is estimated to be $10.1 million.

BriaCell Therapeutics to Acquire Sapientia Pharmaceuticals

BriaCell Therapeutics Corp. (TSXV:BCT), a Canadian developer of cancer immunotherapy technology, has agreed to acquire Sapientia Pharmaceuticals, Inc., a U.S.-based developer of therapeutics for several cancers and fibrotic diseases. Total transaction value is estimated to be $412 thousand.

Financials (Announced)

Woden Venture Capital to Acquire ACCUM Therapeutics

Woden Venture Capital, a Canadian firm, has agreed to acquire ACCUM Therapeutics Inc., a Canadian biotechnology firm focused on enhancing the delivery of tumour-specific therapeutic drugs. No transaction terms were released.

Information Technology (Announced)

Greenbank Capital to Acquire Slabdeck Technology

Greenbank Capital Inc. (OTCPK:GRNB.F), a Canadian firm, has agreed to acquire Slabdeck Technology Inc., a Canadian developer of a mobile search application. No transaction terms were released.

EagleTree Capital; Investment Management Corporation of Ontario; Honeywell Pension to Acquire Corsair Components

EagleTree Capital LP, a U.S.-based firm, Investment Management Corporation of Ontario, and Honeywell Pension, the pension arm of U.S.-based conglomerate Honeywell, have agreed to acquire Corsair Components, Inc., a BHC Middle Market Funding, Francisco Partners Management, and Lazarus Management Company backed U.S.-based manufacturer of high-performance PC components and peripherals. Total transaction value is estimated to be $657 million.

Motorcar Parts of America to Acquire D&V Electronics

Motorcar Parts of America, Inc. (NasdaqGS:MPAA), a U.S.-based manufacturer of automotive aftermarket parts, has agreed to acquire D&V Electronics Ltd., a Canadian manufacturer of parts for the electric and hybrid electric vehicle industry. No transaction terms were released.

Information Technology (Closed)

OSRAM has Acquired LeddarTech

OSRAM GmbH, a German manufacturer of lamps and lighting systems, has acquired LeddarTech Inc., a Desjardins Business Capital régional et coopératif, I-Source Gestion and BDC Venture Capital backed Canadian developer of advanced detection and ranging systems. No transaction terms were released.

Vela Software International has Acquired Petrosys

Vela Software International, Inc., a Canadian provider of software solutions to vertical industries worldwide, has acquired Petrosys Pty Ltd., an Australian developer of software solutions for oil and gas professionals. No transaction terms were released.

ValidateIT Technologies Acquired

A private investor has acquired ValidateIT Technologies Inc., a Canadian provider of market research data and deep analytic platforms. No transaction terms were released.

Open Text has Acquired Covisint

Open Text Corporation (NasdaqGS:OTEX), a Canadian provider of software services supporting the management of business information across various devices, has acquired Covisint Corporation, a U.S.-based provider of an open enterprise class cloud platform. The sellers are Vector Capital, Dialectic Capital Management, J. Goldman & Co. and Roumell Asset Management. Total transaction value is estimated to be $138 million, implying a 0.99x revenue multiple.

Other (Announced)

            PACE Savings & Credit Union to Acquire City Savings & Credit Union

PACE Savings & Credit Union Limited, a Canadian provider of community-cooperative banking services, has agreed to acquire City Savings & Credit Union Limited, a Canadian based provider of banking services. No transaction terms were released.

Other (Closed)

Chéticamp Fisheries International has Acquired Riverside Lobster International

Chéticamp Fisheries International Inc., a Champlain Financial Corporation backed wholesale dealer of Atlantic Canada fresh seafood, has acquired Riverside Lobster International, Inc., a Nova Scotian exporter of lobster. No transaction terms were released.

 

[i] Includes all M&A transactions in which either the target or buyer is a Canadian private company.

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