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Canadian Private Market Recap: Dec 18

  • Posted By: Anan Sivapalu

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Market Update

Last week, the North American markets were mixed. Falling oil prices, weak global economic conditions stemming from China and geopolitical uncertainty in the Middle East remain a concern for the North America markets.  The U.S. Federal Reserve raised the benchmark interest rate by 0.25 percent to 0.5 percent, the first rate hike in almost 10 years.  The U.S. Federal Reserve has also hinted at four small hikes in 2016.  The Canadian dollar reached a new 11-year low, impacted by the confluence of a strengthening U.S. economy and a further decline in the WTI, which reached lows not seen since 2009. The Bank of Canada’s expected divergence in interest rates between the U.S. and Canada will maintain downward pressure on the currency.

 

 

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Capital Markets

 

This Week

Last Week

Year Ago

 

Last Week

Year Ago

Equity Markets

 

 

 

 

 

 

 

S&P 500 Composite

 

2,006

2,012

2,061

 

-0.3%

-2.7%

 

TEV/Forward EBITDA

 

10.0x

10.0x

9.9x

 

+0.0x

+0.0x

TSX Composite

 

13,024

12,790

14,347

 

+1.8%

-9.2%

 

TEV/Forward EBITDA

 

9.4x

9.2x

9.2x

 

+0.2x

+0.2x

Russell 2000 Index

 

1,121

1,124

1,192

 

-0.2%

-6.0%

 

TEV/Forward EBITDA

 

10.1x

10.1x

9.9x

 

-0.0x

+0.2x

CBOE VIX ("Fear Index")

 

20.7

24.4

16.8

 

-15.1%

+23.1%

USD/CAD

 

0.720

0.730

0.862

 

-0.010

-0.142

 

 

 

 

 

 

 

 

 

Debt Markets

 

 

 

 

 

 

 

U.S. 10-Year Treasury Yield

 

2.2%

2.1%

2.2%

 

+0.1%

-0.0%

U.S. Middle Market Loans

 

 

 

 

 

 

 

 

New Issue Clearing Yield ≤ $50 million

 

6.6%

6.6%

6.6%

 

0.0%

-0.1%

 

Spread to Treasury

 

437 bps

443 bps

442 bps

 

-6 bps

-5 bps

 

Total Debt/EBITDA

 

5.8x

5.8x

4.9x

 

0.0x

+0.9x

Source: Capital IQ

In a longer term context, the North American capital markets and equity valuations remain near cyclical highs, while U.S. treasury rates and the Canadian dollar are relatively low.

 

Weekly Canadian Private Market M&A Report

Announced Deals

§ Shaw Communications to buy Wind Mobile
§ RioCan to sell U.S. retail properties to Blackstone

Closed Deals

§ SAF-Holland sells AerWay
§ Kahala acquires Pinkberry
§ Xplornet buys Platinum Communications
§ Manitoba Harvest buys Hemp Oil Canada
§ Dutch infrastructure fund acquires Ontario solar project
§ Ontario Teachers, J.P. Morgan buy Koole Terminals
§ PSP Investments and Abu Dhabi buy industrial portfolio
§ Waterton closes buy of Barrick’s Nevada assets
§ Stingray acquires iConcerts

 

Announced Deals

Shaw Communications to buy Wind Mobile

Shaw Communications, based out of Calgary, has agreed to purchase Wind Mobile and its parent Mid-Bowline Group for $1.6 billion from a consortium of investors. Jay Mehr, Shaw’s CEO said, “This was absolutely the best way to enter the Canadian wireless market.” Wind is the fourth largest wireless carrier and services approximately 940,000 wireless customers across Canada. Wind recently raised $425 million in debt to upgrade its network to the LTE technology. With this acquisition and the upgraded wireless network, Shaw Communications can effectively compete against TELUS, its main rival in Western Canada. 

RioCan to sell U.S. retail properties to Blackstone

Blackstone Real Estate Partners will acquire the U.S. portfolio of RioCan Real Estate Investment Trust. The 49 retail properties located in the Northeastern U.S. and Texas will be sold for US$1.9 billion (C$2.7 billion). The properties were bought in 2009 for US$1.7 billion.   The sale is expected to close in April 2016. Edward Sonshine, CEO of RioCan commented on the deal by stating, “We are very pleased to complete our strategic review, which has culminated in the decision to sell our U.S. portfolio at an opportune time, and to realize a sizeable gain on our investment relative to RioCan’s historical cost. The sale will enable management to focus exclusively on RioCan’s operations in Canada.” The favorable exchange rate was a factor in the decision to sell the U.S. portfolio.

 

Closed Deals

SAF-Holland sells AerWay

A portfolio company of GenNx360 Capital Partners, Salford Group, has acquired AerWay, the Canadian subsidiary of SAF-Holland Group. AerWay, a soil loosening and cultivation equipment supplier is a natural fit for Salford, a specialist in soil tillage machinery. Financial terms of the transaction were not disclosed.  The divestiture came about for two reasons: AerWay contributed very little to SAF’s revenue line and it was not core to its operation.

Kahala acquires Pinkberry

Kahala Brands, a portfolio company of Serruya Private Equity and the Delavaco Group, has acquired Pinkberry brand, a frozen yogurt franchise business based in Santa Monica, California. Financial terms of the transaction were not released. Michael Serruya, chairman and CEO of Kahala Brands noted, “The Pinkberry brand is known worldwide for its super-premium frozen yogurt and truly is the concept that reignited the frozen yogurt category over a decade ago. With over 260 stores in 20 countries, Pinkberry has a history of exceptional growth in just 10 years because of the product quality, flavor profile and personality of the concept.”

Xplornet buys Platinum Communications

Xplorent Communications, a portfolio company of Catalyst Investors and Werklund Capital Corp, has acquired Platinum Communications Corp, a rural broadband services provider based in Calgary. Financial terms of the transaction were not released. The acquisition was welcomed by Bill Macdonald, the EVP of Business Development. He noted, “With the complementary rural Internet expertise that we share, the new relationship provides tremendous value for Platinum customers who will benefit from Xplornet’s national capabilities and customer-first focus.” The acquisition will give Xplornet new opportunities in commercial and enterprise services. By leveraging Xplorenet’s LTE and 4G satellite solutions, the new company hopes to expand services to untapped rural areas across Canada.

Manitoba Harvest buys Hemp Oil Canada

Fresh Hemp Foods (a.k.a Manitoba Harvest), a portfolio company of Compass Diversified Holdings (CODI), has acquired Hemp Oil Canada (HOCI) for $42 million.  Alan Offenberg, CEO of Compass, stated, “Following our platform acquisition of Manitoba Harvest in July, we are pleased to make this accretive add-on acquisition, which will further drive Manitoba Harvest’s already strong growth trajectory.” Mike Fata, CEO of Fresh Hemp Foods added, “HOCI is a pioneer in the industry and we are excited to work with its management team and experienced staff, as we seek to further accelerate our growth potential. HOCI’s leading ingredients and private label business compliments our branded business.” HOCI offers certified organic, kosher and halal based hemp products. The company has recently completed the construction a 35,000 square feet facility to produce allergen free products.

Dutch infrastructure fund acquires Ontario solar project

Dutch Infrastructure Fund has acquired the Illumination project located in Scugog, Ontario from Canadian Solar Solutions, a manufacturer of solar modules and provider of solar energy solutions. The financial terms of the 10 megawatt project were not released. The project sells power to Ontario Power Authority under 20-year-feed-in-traiff contract. Paul Huebener, Head of Dutch Infrastructure Fund Americas stated, “Illumination is another high quality project acquired through our partnership with Canadian Solar, a preeminent solar manufacturer and developer in North America. The project will further increase DIF’s renewable energy portfolio in North America and provide investors long term, stable cash flows.”

Ontario Teachers, J.P. Morgan buy Koole Terminals

Koole Terminals, a storage company located in Northwestern Europe has been jointly acquired by J.P. Morgan Asset Management and OTPP. Financial terms of the transaction were not released. However, it is believed the sale value exceeds EUR 1 billion. The Koole family and the current senior management are expected to retain an ownership interest in the company. Koole Terminal is headquartered in Netherlands and operates eight tank storage terminals, twelve barges and three coasters.

PSP Investments and Abu Dhabi buy industrial portfolio

Henley Holdings, a joint venture of Abu Dhabi Investment Authority (ADIA) and Public Sector Pension Investment Board (PSP Investments), has acquired a portfolio of industrial properties owned by Exeter Property Group for $3.15 billion. Exeter will continue managing the properties. Collectively, the newly acquired properties consist of 209 industrial assets with 58 million square feet of space. The properties are located in 25 key distribution centers throughout the United States. Ward Fitzgerald, CEO of Exeter said,  “We are very pleased to have concluded the sale of this exceptional portfolio of industrial properties on behalf of our investors. ADIA and PSP Investments are two of the most highly-regarded international real estate investors, and we are thrilled to work with our new partners in the continued successful management of these properties as well as in other opportunities in the United States and abroad.” Tom Arnold, Head of Americas Real Estate at ADIA added, “We have great confidence in the growth potential of the US industrial sector, particularly in high-quality properties that meet the evolving logistical needs of traditional and omni channel businesses.”

Waterton closes buy of Barrick’s Nevada assets

Waterton Global Resource Management, a private equity firm based in Canada, has closed the acquisition of Barrick Gold Corp’s Nevada mining assets for $110 million in cash. The acquisition provides Waterton with 70 percent ownership interest in the Spring Valley project and 100 percent ownership in the Ruby Hill gold mine.  Isser Elishis, CIO of Waterton Global said, “We are very excited to add Spring Valley and Ruby Hill into our growing portfolio of high quality, advanced stage development and production assets.”

Stingray acquires iConcerts

Stingray Digital Group, a B2B multiplatform music provider, has acquired iConcerts, a live music focused television channel headquartered in Switzerland. Financial terms of the transaction were not disclosed. The acquisition is expected to add $5 million in annual revenue to Stingray. The Swiss based iConcerts distributes live music in over 85 countries through Pay-TV and OTT operators. It reaches over 250 million households in Europe, Middle East, Asia and Africa. Eric Boyko, President, Co-founder and CEO of Stingray stated, “Following the acquisitions completed over the last two quarters, the agreement with iConcerts further demonstrates our intent to provide our clients with the greatest variety of digital music products and services on the market. iConcerts’ live music concert library perfectly complements Stingray’s current offering (Stingray Concerts, Stingray Brava, and Stingray Djazz), allowing us to become the number one destination for exciting live performances on television.”

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