Value Unleashed

Market Update

Last week the North American markets had their largest drop since the week ended August 21, driven primarily by the second consecutive monthly decline in Chinese exports. The Federal Reserve’s interest rate decision next week also weighed on the markets. All of the equity markets experienced significant declines last week. The Canadian markets were further impacted by the Canadian dollar hitting a 10-year low and WTI dropping to levels not seen since 2009. Market volatility also increased significantly amidst global economic uncertainty. In the credit markets, treasury yields declined and the credit spreads increased as investors moved into treasuries to weather the global economic uncertainty.

Source: Capital IQ

The North American M&A has seen a marked increase in the size of transactions, with dollar volumes increasing significantly from the same period last year while the number of transactions has decreased over the same period.

Source: Capital IQ

In a long-term context, the U.S. M&A market is in mid-cycle, while the Canadian market is at approaching cyclical lows, particularly in terms of deal count. However, Preqin reports that Canada is the foreign destination of choice for U.S. private equity and venture capital investments, with 10% of all foreign investment heading to Canada.

Weekly Canadian Private Market M&A Report

Announced Deals

§ Cott to acquire Aquaterra

§ MatrixCare to acquire AOD Software

§ Hostess bids for Give and Go

§ Nasdaq to buy Chi-X

Closed Deals

§ Bridon and Bekaert to Merge Ropes and Cords Unit

§ TorQuest sells Array Marketing to Carlyle

§ NXP closes buy of CPPIB-backed Freescale Semiconductor

Announced Deals

Cott to acquire Aquaterra

Aquaterra Corp, a portfolio company of Birch Hill Equity Partners will be acquired by Cott Corporation. The deal is valued at $62 million is expected to close in January 2016. Jerry Fowden, Cott’s CEO, stated, “The Aquaterra acquisition is another great step in our stated strategy to consolidate the higher margin home and office water delivery and coffee services categories where we believe our platform, operating strength and synergies can be leveraged.”

MatrixCare to acquire AOD Software

MatrixCare, a portfolio company of OMERS Private Equity, has definitively agreed to purchase AOD Software, a senior citizen focused healthcare platform. “MatrixCare provides the top-of-the-line solutions for skilled nursing and senior living facilities while the AOD product is the best in market for CCRCs (Continuing Care Retirement Communities). By integrating our collective technologies under a common care coordination platform, we will be able to offer the industry’s first true full-spectrum solution for helping the emerging set of conveners and diversified LTPAC  (Long-term Post-Acute Care) operators to deliver superior care and better outcomes”, said John Damgaard, President & CEO of MatrixCare. Financial terms of the acquisition were not released.

Hostess bids for Give and Go

Hostess has begun negotiating the acquisition of Give and Go Prepared Foods Corp from its owner, OMERS Private Equity. OMERS Private Equity was previously exploring an IPO for the company. An unknown source revealed that the deal could be worth $800 million. However, Hostess may face competition from other potential bidders.

Nasdaq to buy Chi-X

Nasdaq revealed that it would acquire the alternative equities trading platform of Chi-X Global Holdings. Financial terms of the acquisition were not revealed. The deal is expected to close in the first quarter of 2016.  Hans-Olde Jochumsen, the Nasdaq CEO stated, “This acquisition is an important part of our North American strategy as Chi-X handles about 22 percent of the order flow of S&P/TSX Composite securities in Canada.”  

Closed Deals

Bridon and Bekaert to Merge Ropes and Cords Unit

Bridon, a portfolio company of OTPP, and Bekaert, a Belgian company, have agreed to merge their ropes and advanced cords business segments to form Bridon Bekaert Ropes Group. Financial terms of the merger were not disclosed. The new company will have the ability to serve customers across 11 countries with further opportunities to expand into Asia. The combined company will employ approximately 3,000 employees and operate 11 manufacturing facilities globally. The new company is expected to generate €600 million in annual sales.

TorQuest sells Array Marketing to Carlyle

Array Marketing, a portfolio company of TorQuest has been sold to The Carlyle Group. Financial terms of the transaction were not disclosed. Array marking is a provider of visual merchandizing solutions to name-brand cosmetic suppliers for over 30 years.  Tom Hendren, the CEO of Array welcomed the new partnership. He added, “TorQuest has been an ideal partner for us. Their commitment to investing in our business and our people has provided Array with a solid platform for continued growth and success. The management team remains highly committed to the business and our customers, and we will remain meaningful shareholders as we forge our new partnership with Carlyle.” TorQuest is expected to realize a 61% IRR and a cash-on-cash return in excess of five times.

NXP closes buy of CPPIB-backed Freescale Semiconductor

NXP Semiconductors has acquired Freescale Semiconductors, a jointly owned company of CPPIB and other private equity investors. The acquisition, valued at US$16.7 billion including debt, is expected to be accretive to NXP and provide $200 million in cost savings in 2016 with potential for $500 million in annual cost synergies with further restructuring.  Rick Clemmer, NXP CEO stated, “This merger enables us to deliver more complete solutions to our customers as we are emerging as the leader in the Secure Connections – and the supporting infrastructure – for the Smarter World domain.” The combined company is expected to generate over $10 billion in revenue.