Value Unleashed

Market Update

North American equity markets experienced their steepest decline since August 2011. The major equity indices fell sharply last week as concerns about the Chinese economy and multiple “circuit breaker” shut downs of the Chinese equity market overshadowed the positive U.S. employment report (292,000 jobs added in December and positive revisions to October and November).  The U.S. mid-cap market was hit particularly hard.  As oil prices continued to slide, the Canadian dollar reached lows not seen since May 2003.  Despite the turmoil, credit markets showed little apparent impact.

Source: Capital IQ

In the broader cyclical context, on a rolling three month basis (period ended November 30, 2015), U.S. M&A activity and dollar volume are sitting near the cyclical mid-point.  However, Canadian M&A activity is near cyclical lows with activity over the last three months at less than half the level seen for the most active three-month period.  Canadian deal value on the other hand appears much healthier due to two large GE Capital divestitures, which account for almost half the total ($18 billion).

Although 2016 started on the low side, there is ample capital available to support M&A activity. Corporate cash balances in North America have remained at approximately $7.1 trillion and North American private equity overhang is estimated at US$535 billion.

Source: Pitchbook

Weekly Canadian Private Market M&A Report

Announced Deals

Zymeworks strikes optional merger deal with Kairos
Hudson’s Bay to buy Gilt Groupe
SterlingBackcheck to merge with TalentWise
CPPIB to acquire student housing project

Closed Deals

Trescal buys Primo Instrument
Pinova Holdings sold to Symrise
Fibrenoire sold to Videotron
Luma acquires Nodal Industries
Fleet Complete buys ITmobile
Avison Young acquires Metrix Realty Group
Compuware acquires ISPW
Cott wraps up acquisition of Aquaterra

Announced Deals

Zymeworks strikes optional merger deal with Kairos

Zymeworks, a bio-therapeutics company that is developing antibody drug treatments for cancer, autoimmune and inflammatory diseases, has entered into an optional merger agreement with its strategic partner, Kairos. Kairos, a biopharmaceutical company, has developed an antibody drug conjugate platform based on novel toxin, linker and site specific conjugation technology.  The deal would integrate R&D efforts of both companies to accelerate the development of cancer related bio-therapeutic drugs.  Ali Tehrani, President and CEO of Zymeworks welcomed the agreement and stated, “We are excited to work with the team at Kairos in bringing together complementary technologies for the creation of novel and highly efficacious therapies for cancer patients.”

Hudson’s Bay to buy Gilt Groupe

Hudson’s Bay Co., a Canadian department store, has agreed to purchase Gilt Groupe Holdings Inc., for US$250 million in cash. The deal is expected to close by February 1, 2016. The acquisition provides a means of penetrating the millennials consumer base through Gilt’s digital platform.  Jerry Storch, the Chief Executive Officer of HBC, explained the rationale for the purchase by stating, “Adding Gilt to our rapidly growing digital business is very exciting and we see tremendous potential to enhance our mobile and personalization strategies by leveraging Gilt’s advanced capabilities. We look forward to welcoming the Gilt team to HBC and to benefitting from the complementary nature of our businesses.” Gilt has over 9 million members and generates approximately 50% of its sales through its mobile platform.

SterlingBackcheck to merge with TalentWise

SterlingBackcheck, a provider of background screening, has entered into an agreement to merge with TalentWise, a provider of a regulator-compliant cloud based HR management platform. Terms of the merger were not released. Clare Hart, SterlingBackcheck’s CEO said, “By uniting TalentWise’s modern customer experience with SterlingBackcheck’s powerful screening platform, we will be able to better serve clients and applicants around the globe.” This acquisition would be the ninth M&A transaction in the last several years as SterlinBackcheck improves its internal capabilities and accelerate its growth. SterlingBackcheck is a portfolio company of Caisse de depot et placement du Quebec.

CPPIB to Acquire student housing project

CPPIB in partnership with Singapore wealth fund GIC and The Scion Group will purchase University House Communities Group (UHC), a student housing portfolio in the U.S. for around US$1.4 billion.  Peter Ballon, head of real estate investments in the Americas at CPPIB said, “The UHC portfolio represents a valuable opportunity to enter the U.S. student housing sector with top-tier, well-located assets. This transaction enables us to gain immediate scale in the attractive U.S. student market.” CPPIB and GIC will both own 47.5 percent, while Scion will own remaining 5 percent.

Closed Deals

Trescal buys Primo Instrument

Trescal, a calibration specialist based in France, has acquired Primo Instruments. Financial terms of the transaction were not released. Primo Instruments, based in Montreal, Canada, provides test and measurement equipment. The Deputy CEO of Tescal, Guillaume Caroit said, “We are thrilled to have Primo Instrument joining Trescal. Canada has always been a target for our geographical expansion as a large number of the group’s aeronautics and space customers are already located in this country.”

Pinova Holdings sold to Symrise

TorQuest Partners, a Canadian private equity firm, has sold its portfolio company Pinova Holdings to Symrise AG for $417 million. Pinova, a specialty chemical manufacturer from natural and renewable feedstocks, was carved out of Ashland by TorQuest for US$75 million in 2010. Ted Butz, CEO of Pinova Holdings commented on the sale, “TorQuest has been an ideal partner for us as we have built and grown Pinova Holdings. Their commitment to investing in the business and its people has provided Pinova Holdings with a solid platform for continued growth and success.”

Fibrenoire sold to Videotron

Fibrenoire, a portfolio company of Novacap has been sold to Videotron, a subsidiary of Quebecor for $125 million. Fibrenoire, a provider of fiber-optic connectivity services for commercial properties, owns and operates a network of over 4,500 kilometers in Montreal, Toronto, Quebec City and Ottawa.  Benjamin Desmarais, President and CEO of Fibrenoire noted, “The valuable advice, experience and capital provided by NOVACAP were vital to the success of our company. We would like to thank NOVACAP for its contribution and we are excited to join forces with Vidéotron to better meet the growing needs for fiber-optic connectivity services for businesses.”

Luma acquires Nodal Industries

Luma, a WiFi systems company focused on speed, safety and security, has acquired Nodal Industries, an Internet of Things security start-up. Financial terms of the transaction were not released. With the integration of the Nodal platform into its systems, Luma hopes to enhance its home WiFi network capabilities. Marcus Eagan, CEO of Nodal Industries said, “I couldn’t be more excited to join Luma’s world-class security team. By merging these two technologies, consumers will now enjoy the equivalent of having the world’s most advanced corporate internet security team right in their home–so you never have to worry about the security vulnerabilities that come with great smart home products ever again.”

Fleet Complete buys ITmobile

ITMobile, a Dutch fleet telematics business has been acquired by Fleet Complete, a Canadian provider of fleet telematics and mobile workforce technology. Financial terms of the transaction were not released. The funding for the acquisition came from equity from both management teams as well as Madison Dearborn Partners, a U.S. private equity firm.  Tony Lourakis, CEO of Fleet Complete commented on the acquisition, “We are excited about the transaction and look forward to working closely with our ITmobile team in the Netherlands, Belgium and Luxemburg to accelerate our collective growth and Fleet Complete’s European expansion.” The acquisition of ITMobile is the second acquisition since Madison Dearborn Partners made investment in Fleet Complete in 2014.

Avison Young acquires Metrix Realty Group

Avison Young, a commercial real estate service provider has acquired Metrix Realty Group (Ontario) Inc., a Toronto based property appraisal company. Financial terms of the transaction were not disclosed. Mark E. Rose, CEO of Avison Young commented, “This expansion of our existing property appraisal service-line offering will give us greater capabilities to provide valuation and advisory services to our clients on a local and national basis – something that our clients are asking for. This acquisition is the ideal way to accomplish that goal.” Avison Young is a portfolio company of Parallel49 Equity (formerly Tricor Pacific Capital).

Compuware acquires ISPW

Compuware Corp., a mainframe application platform provider, has acquired the assets of ISPW Benchmark Technologies, a Calgary based provider of cross-platform Agile Source Code Management and Release Automation solutions. Financial terms of the transaction were not released. ISPW President Paul Kuszyk welcomed the acquisition and commented, “Joining Compuware will enable us to more aggressively invest in our capabilities to support an iterative and agile approach to development and add more value by integrating into the broader enterprise DevOps ecosystem.” Compuware Corp. is a portfolio company of Thoma Bravo, a U.S. based private equity firm. It was taken private at a deal valued at US$2.4 billion.

Cott wraps up acquisition of Aquaterra

Beverage producer Cott Corp. has closed its acquisition of Aquaterra, a Birch Hill portfolio company, for $62 million (US$45 million). Jerry Fowden, Cott’s CEO commented, “The Aquaterra acquisition demonstrates the continuing execution of our strategy to become a more diversified beverage provider across multiple channels and geographies, as well as our continuing consolidation of the higher margin home and office water delivery and coffee services category.” Cott will gain 70,000 new customers, a new delivery network and solidify its position in water and coffee delivery and water filtration services.