Value Unleashed

Market Update

The slowing Chinese economy and rising tensions in the Middle East weighed heavily on the global markets in the last two weeks of December. The injection of US$20 billion of liquidity by the Chinese central bank calmed the markets. The Canadian dollar stabilized around US$0.72 and the broad North American markets lost ground in 2015.  Forward EBITDA multiples have remained remarkably stable.
 

Source: Capital IQ

Although the North American Markets lost ground in 2015, the U.S. markets (including valuation multiples) remain near cyclical highs.  Canadian equity markets are showing mid-cycle characteristics and the Canadian dollar (versus the U.S. dollar) remains at the lowest point seen in over 10 years.

U.S. M&A activity and dollar volume have continued to slow significantly versus the prior year. The weakening Canadian dollar and the disruption caused by lower oil prices have attracted the attention of long-term foreign investors, especially in the embattled oil and gas sector.  While Canadian activity has moderated, the average deal size has increased dramatically due to $12 billion purchase of Antares Capital by CPPIB Credit Investment and $6 billion purchase of Gelco Corporation by Element Financial Corporation. In both transactions, GE Capital was the seller.   Aggregate cash balances in the U.S. have remained stable, while Canadian corporate cash balances have increased materially from levels reported in November 2014.
 

Source: Capital IQ

There is ample liquidity available to underpin M&A activity in 2016. Corporate cash balances in North America have remained stable, at approximately US$7.1 trillion and the North American private equity overhang (including both venture and buyout funds) is estimated at US$535 billion.
 

Source: Pitchbook

Weekly Canadian Private Market M&A Report

 Announced Deals 

• Mexico’s ICA in talks with Caisse 
• Airbus to buy Navtech
• Chinese investors to buy Long Run
• Advance Engineered Products to sell vacuum trucks maker

Closed Deals

• TriWest Capital Partners buys ATCO Emissions Management
• IHS Automotive acquires CARPROOF
• StoneCalibre acquires Sagemcom Canada
• Gateway acquires Playtime Gaming
• Nelson Global Products buys Silex Innovations
• Altice closes majority investment in Suddenlink
• Kik Interactive buys Blynk
• BayBridge Seniors Housing closes Amica deal
• Ivanhoé, Blackstone tie up buy of New York’s Stuyvesant Town

Announced Deals

Mexico’s ICA in talks with Caisse

ICA has sold its entire 49 percent stake in the environmental waste management firm Proactiva Medio Ambiente Mexico to Fernando Chico Pardo, a prominent Mexican businessman. ICA is under financial distress, with US$2.97 billion in debt. The asset sale has provided some relief in meeting its interest obligations. ICA is currently negotiating with Caisse de depot et placement du Quebec regarding a possible sale of selected assets. Details of the negotiation have not been released.

Airbus to buy Navtech

Airbus has agreed to purchase Navtech Inc., a portfolio company of ABRY Partners, a U.S. private equity firm. Financial terms of the transaction were not released. Navtech, based in Canada, provides flight operations solutions to more than 400 airlines and aviation service clients worldwide. Fabrice Brégier, Airbus’ President and CEO said, “We are very pleased to welcome Navtech into our company, contributing its industry-leading portfolio of digital solutions and expert know-how. This acquisition is further affirmation of Airbus’ digitalization and services growth strategies, and is a significant milestone to serve our existing and future customers.” Mike Hulley, CEO of Navtech added, “The signing of this agreement with Airbus is excellent news for the Navtech teams, who are joining a group with international standing, providing them with access to new markets leveraging on complementary aviation expertise. Our customers will benefit from game-changing innovations and enhanced customer experience of our digital flight operations services.”

Chinese investors to buy Long Run

Driven by challenging market conditions, Long-run Exploration Ltd., a Calgary based oil and natural gas company focused on exploration and development, has tentatively agreed to be purchased by group of Chinese investors. The deal is valued at $770 million inclusive of net debt.  Operations of Long-run are not expected to be impacted by the sale. The transaction is subject to regulatory, debtor and legal approval.

Advance Engineered Products to sell vacuum trucks maker

Advance Engineered Products Ltd, a portfolio company of Ironbridge Equity Partners, has agreed to sell its subsidiary Westech Vac Systems Ltd. to Federal Signal Corp.. The transaction is expected to close in January 2016. Westec Vac Systems, based in Nisku Alberta, manufactures rugged vacuum trucks which are designed to withstand extreme environmental conditions.  Jennifer L. Sherman, Federal Signal’s incoming CEO commented, “Although this acquisition is not significant in size, Westech offers Federal Signal an effective and efficient entry into a new line of DOT (U.S. Department of Transportation certified) product offerings. We have been impressed with the quality of Westech’s people, products and potential. We expect it to be the first in a series of acquisitions, and it fits our strategy of acquiring capabilities that our core businesses can build upon.” Federal Signal expects the acquisition to provide $10 million in incremental revenue in 2016 and to be accretive in 2017. No further financial terms were released.

Closed Deals

TriWest Capital Partners buys ATCO Emissions Management

TriWest Capital Partners, a private equity firm based in Calgary, Alberta, has acquired the global operations of ATCO Emission Management. Financial terms of the transaction were not released. ATCO, the parent company is following its strategy to divest all non-core assets. It will focus on its core strengths in Structures and Logistics and Electricity, Pipelines and Liquids moving forward.

IHS Automotive acquires CARPROOF

CARPROOF Corporations, a portfolio company of Hellman & Friedman, has been acquired by IHS Automotive for $650 million. CARPROOF provides automotive vehicle history reports. IHS also acquired CARFAX, a U.S. based company in a similar line of business to CARPROOF. Jerre Stead, the CEO of IHS said, “Like CARFAX, CARPROOF is a high-growth business and gives IHS the opportunity to expand our vehicle history report services into Canada. By combining the capabilities of CARPROOF and CARFAX, we also will accelerate product development to better serve the needs of our customers.”

StoneCalibre acquires Sagemcom Canada

StoneCalibre, a U.S. private equity firm, has acquired Sagemcom Canada from France based parent, Sagemcom Documents SAS. Financial terms of the transaction were not released. Sagemcom Canada has been renamed to XMedius Solutions Inc. The company provides enterprise level secure document exchange solution. Brian Wall, founder and CEO of StoneCalibre noted, “Over the years, XMedius has developed innovative and best-in-class secure document exchange solutions with superior product functionalities. It has also developed unsurpassed market expertise and exceptional customer service, led by a strong team of experienced executives. Sending and sharing sensitive and confidential information is becoming a key requirement for more and more organizations, and XMedius offers us a solid growth platform in this burgeoning market. We are very pleased to add XMedius to the StoneCalibre portfolio and we will seek additional acquisition opportunities to augment its organic growth.”

Gateway acquires Playtime Gaming

Gateway Casinos & Entertainment Ltd, a portfolio company of Catalyst Capital Group, has acquired Playtime Gaming Incorporated. Financial terms of the transaction were not released. The acquisition increases Gateway’s gaming facilities to 18, extending its reach to four new markets across British Columbia. Gary Gordon, the CEO of Playtime welcomed the acquisition and stated, “Gateway is a leader in gaming across Canada. I am excited for our employees and our customers as we become part of a best-in-class gaming and entertainment company.” Toney Santo, the CEO of Gateway added, “This is an exciting day for everyone at Gateway as we welcome Playtime to be a part of Gateway’s growth strategy.”

Nelson Global Products buys Silex Innovations

Nelson Global Products, a portfolio company of Wind Point Partners has acquired GT Exhaust and Silex Innovations from parent company IAC Group. Financial terms of the transaction were not released. Silex, a Mississauga, Ontario based company, provides exhaust products which include silencers, emission control products, insulation blankets and other exhaust accessories. Kevin Stokstad, General Manager at Nelson stated, “This acquisition is a very exciting opportunity for us and is an excellent fit for our company. The GT and Silex brand names and product offering will further strengthen Nelson’s position as the market leader and our commitment to the Industrial, Off Highway, and On Highway markets for acoustic products.”

Altice closes majority investment in Suddenlink

Altice, a European telecom group, has acquired a 70 percent stake in Suddenlink, a U.S. regional cable company in a deal worth approximately US$9.1 billion. Suddenlink was jointly acquired by BC Partners, a U.K based private equity firm and CPPIB in 2012. The consortium is expected to receive US$960 million in cash, US$200 million in vendor note and retain 30 percent stake in the company when the transaction closes. A spokesperson for Altice stated, “With this acquisition, Altice has officially entered the large and attractive U.S. cable market, further diversifying and balancing its portfolio of high-quality businesses.”

Kik Interactive buys Blynk

Kik Interactive has purchased Blynk. Financial terms of the transaction were not released. Blynk is the developer of BlynkStyle, an app which allows discovery of outfit ideas by allowing users to swipe through a series of different looks. BlynkStyle allows users to get personalized fashion advice through computer-programmed responses to queries (commonly referred to as “bots”). The acquisition will allow Kik to gain expertise in automated personal chat assistance or “bot” technology which it hopes to deploy to areas outside of fashion.

BayBridge Seniors Housing closes Amica deal

BayBridge Seniors Housing, a subsidiary of OTPP has closed its acquisition of Amica Mature Lifestyle Inc., a Canadian operator of senior retirement residences. The deal was valued at $578 million. The acquisition will add 25 luxury seniors’ properties to BayBridge’s current portfolio. With the close of the transaction, BayBridge will own and operate 59 senior living communities across Alberta, B.C. and Ontario. Doug MacLatchy, CEO of BayBridge welcomed the acquisition and stated, “The combination of BayBridge and Amica will create Canada’s premier senior living company. There is an excellent fit in the services offered and the market locations of the two companies, with a shared focus on resident satisfaction.” BayBridge currently has six communities under construction with additional sites in the development stage.

Ivanhoé, Blackstone tie up buy of New York’s Stuyvesant Town

Ivanhoe Cambridge, a real-estate subsidiary of Caisse de depot et placement du Quebec and Blackstone Group have jointly acquired Peter Village Stuyvesant Town (PCVST). Financial terms of the transaction were not released. However, a Bloomberg estimate values the transaction at US$5.3 billion. PCVST is a residential development area on the east side of Manhattan, New York City with 56 residential buildings across 80 acres of land. Daniel Fournier, Chairman and CEO of Ivanhoé Cambridge said, “We are honored to share with Blackstone the responsibility of the future of PCVST. This investment is a win-win for the community of 30,000 residents, for our investors and for New York.”