Canadian Private Market Recap: July 1

  • Posted By: Louis Goldberg and Paris Aden

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Market Update

Global economic uncertainty remains prevalent as investors cope with an unfamiliar climate following the Brexit. Global equities regained the majority of their immediate post-Brexit losses. The S&P 500 posted its best multi-day rally in months. The TSX Composite recovered from a seven-week low, led by the financial and energy sectors. Withstanding optimistic forecasts in both U.S. and Canadian GDP growth for April, it is generally believed that neither the Fed nor BoC will raise interest rates in the near term. Yields on the 10-year Treasury note briefly hit historic lows Friday before rebounding, as investors worry that central banks will pump new stimulus into the economy.

Meanwhile, credit markets remained robust.

North American M&A activity slowed down significantly in terms of total deal count compared to one year ago, particularly in the U.S. This is largely because acquirers have become increasingly selective in deal making, as overall deal quality has decreased. It is believed that during the robust 2014 and 2015 periods, the high quality companies went to market, leaving overall lower quality for the 2016 period.

Valitas Insights

Impact of Brexit on Canadian Markets

While the rippling global macroeconomic effects of Brexit unfold, it is of chief importance to analyze the potential consequences on Canadian industries. The impact of the strengthening U.S. dollar will favour Canadian exporters. A weaker commodity outlook will result in familiar poor behaviour in the energy and base metals sectors. Energy and Materials stocks, other than gold, are likely to face strong headwinds as commodities react negatively to U.S. dollar strength and concerns over global growth. General market volatility and risk aversion will impact cost of capital and overall business confidence. Gold and gold stocks should benefit from economic uncertainty. Defensive sectors such as Utilities, Telecom, REITs and Consumer Staples should see positive fund flows as investors seek safer assets.

The UK alone is the third largest buyer of Canadian goods, after the U.S. and China. There are general concerns surrounding the effects on trade relationships. The manufacturing sector will suffer most, should trade relationships weaken. Overall, it is expected that the largest impacts will be realized due to the foreign exchange swings, mainly strengthening USD and weakening Pound.

Weekly Canadian Private Market M&A Report

Announced Deals

Onex Corporation Acquires Majority Stake in WireCo

Onex Partners IV fund acquired a majority stake in WireCo WorldGroup, a U.S. maker and distributor of steel wire rope, synthetic rope, specialty wire and engineered products. The deal was valued at $260 million USD. The proceeds will help with the recapitalization of the firm and is expected to close later in the year. Kosty Gilis, a Managing Director with Onex stated: “We are excited to partner with Chris Ayers and his team to support WireCo’s growth both organically and through acquisitions for years to come.”

Closed Deals

Domtar Corporation Acquires Butterfly Health

Domtar, a leading provider of a wide variety of fiber-based products including communication, specialty and packaging papers, market pulp and absorbent hygiene products, acquired Butterfly Health, a manufacturer and distributor of body liners, which offer discreet, secure protection for accidental bowel leakage. No financial terms were disclosed. Mike Fagan, President of Domtar Personal Care stated that the acquisition “represents a complementary addition to our portfolio of brands and technologies.”

AT&T Acquires Quickplay Media

AT&T (NYSE:T) has acquired Quickplay Media, a managed video platform that powers video over all networks and devices. Quickplay Media is a Canadian portfolio company of U.S. private equity frim Madison Dearborn Partners. No financial terms were disclosed. Quicktime’s platform is expected to support streaming services AT&T plans to launch in the coming year.

Implus Acquires Spenco’s Medical Adhesive Assets

Implus, a provider of athletic, fitness, and outdoor accessories, has acquired Spenco’s Medical Corporation’s insole and 2nd Skin medical adhesive assets. No financial terms were disclosed. Todd Vore, President of Implus stated: “Spenco’s tenured legacy in the insole category provides a perfect complement to Implus’ current core product offering.”

Bridon Closes Merger with Bekaert

Bridon, a portfolio company of Ontario Teacher’s Pension Plan, has closed its merger with Bekaert. The combined company will offer a broad range of ropes and advanced cords. Bruno Humblet, the new CEO of Bridon-Bekaert stated: “The new group combines Bekaert’s existing strength in the regions of Americas and Australia and Bridon’s strong market position in Europe and the USA.”

Intelex Technologies Acquires Ecocion

Intelex, a global leader in environmental, health, safety and quality (EHSQ) management software, acquired Ecocion, a U.S. software company focused on environmental management information systems. Intelex is backed by JMI Equity and HarbourVest Partners. No financial terms were disclosed. Mark Jaine, President and CEO of Intelex stated: “The capabilities of both teams, when integrated, will supercharge our ability to deliver the most comprehensive EHSQ software platform to companies of all sizes.”

Cubico Acquires British Solar Parks

Cubico Sustainable Investments, an OTPP and PSP-backed company has acquired ten U.K. operational solar projects from British Solar Renewables. David Swindin, Head of EMEA at Cubico stated: “This acquisition adds to our growing portfolio of renewable energy assets in the UK, which is now our second largest market globally.”

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