Commercial real estate firm Brookfield Property Partners LP said this week it would acquire the 66 percent of GGP Inc that it does not already own in a cash-and-stock deal that values GGP, one of the largest owners and operators of U.S. shopping centres, at about US$15.3 billion, Reuters reported. The agreement comes four months after a special board committee of GGP rejected a US$14.8 billion cash-and-stock offer from Brookfield as inadequate. Under the latest offer, GGP shareholders can elect to receive US$23.50 in cash per share, or either one Brookfield unit or one newly created share that trades as a real estate investment trust.
Shares of Canadian specialty lender Callidus Capital Corp lost as much as 21.6 percent in two trading sessions, hitting an all-time low, after a Reuters report last week raised questions about the valuations that parent firm Catalyst Capital Group assigned to some of its portfolio companies. Callidus, which offers high-interest loans to distressed companies and went public in 2014, is one of the largest holdings in Catalyst’s private equity funds. Among other things, the Reuters report said that Callidus has so far been unable to find a buyer to take the company private.
Canadian financier Newton Glassman has long told his private equity firm’s clients that his big bet on casinos would yield a financial jackpot. Others haven’t been so sure. At the end of 2011, a year after Glassman’s Catalyst Capital Group took control of Gateway Casinos & Entertainment Ltd, Catalyst told investors in a report seen by Reuters that it already had more than doubled their money and that its majority stake was worth US$475 million, for an implied value of the company of US$699 million. But Catalyst was forced to abandon a planned initial public offering of Gateway in 2012 after investors balked at the firm’s valuation.
Caisse de dépôt et placement du Québec, one of the world’s biggest investors in private equity, is increasing its capital deployments by doing more direct deals with a select group of partners. The strategy was on display in 2017, when the pension system closed more than $7.6 billion in transactions. Stephane Etroy, CDPQ executive vice president and head of private equity, told PE Hub Canada that about 70 percent of the total went to co-sponsorships and co-investments.
Canadian privately-held broadband provider Xplornet Communications Inc has hired two investment banks to explore a potential sale that could value the company at $2 billion, including debt, sources told Reuters. Xplornet, based in Woodstock, New Brunswick, is working with UBS Group AG and Bank of Montreal to assist it in the sales process. The process, which is in its early stages, could attract interest from private equity firms and infrastructure funds, the sources said. Xplornet’s private owners include U.S. private equity firms Sandler Capital Management and Catalyst Investors. It has also been backed by Canadian family office Werklund Capital Corp.
Private equity firms are showing an increased interest in acquiring Canadian franchise systems. Many factors make franchise systems particularly enticing targets for investment, including predictable long-term revenue streams, established market penetration and opportunities for growth and synergies. With a huge potential upside, of course, come significant traps for the unwary. In a PE Hub Canada feature article, Osler, Hoskin & Harcourt LLP's Andraya Frith, Dominic Mochrie and Christine Jackson discuss key issues for PE firms when evaluating an investment opportunity in a franchise system as well as key considerations concerning acquisition and exit strategies.
Commercial real estate firm Brookfield Property Partners LP has submitted a new offer to take over GGP Inc, one of the largest owners and operators of U.S. shopping centres, sources told Reuters. The new bid comes more than three months after a special board committee of GGP rejected a US$14.8 billion cash-and-stock acquisition offer from Brookfield Property, its largest shareholder, as inadequate. Brookfield Property’s new offer has a slightly higher cash component and offers GGP shareholders a new security that will trade as a real estate investment trust. The exact value of Brookfield Property’s new bid could not be learned.
Cenovus Energy Inc is seeking a partner to fund $1.3 billion in costs to build the supporting infrastructure at its Narrows Lake oil sands project in Alberta, sources told Reuters. The Canadian energy company has been seeking to raise billions to reduce its debt burden after it spent $17 billion on acquiring oil sands and natural gas assets last year. To avoid placing further stress on its balance sheet, Cenovus hopes to secure the funds to build infrastructure supporting the first phase of Narrows Lake from an outside partner, which would finance construction in exchange for a long-term agreement with Cenovus to utilize the assets. Both strategic names and private equity firms could be interested in funding the Narrows Lake infrastructure.
Swiss packaging maker SIG Combibloc is preparing an autumn stock market listing in Zurich that could value it at about 4.5 billion euros (US$5.5 billion), sources told Reuters. Its Canadian private equity owner Onex Corp has hired Rothschild as an IPO adviser, and other investment banks have also been contacted regarding their interest in helping organize a potential deal. SIG, which makes cartons for beverages and food, was acquired by Onex in 2015 from New Zealand billionaire Graeme Hart in a deal valued at 3.75 billion euros (US$4.62 billion).
Senior participants are warning that today’s market could be as good as it gets, despite a robust global economic backdrop and buoyant mood in the private equity and leveraged loan markets, Reuters reported. Comparisons to 2007’s pre-crisis conditions are becoming more common and industry figures are debating whether today’s robust conditions constitute a bubble, as purchase prices rise, jumbo buyouts proliferate and deal terms become more aggressive. Leveraged buyout purchase price multiples hit a record high of 11.2 times average Ebitda in 2017 and average buyout sizes also hit a new record of US$675 million in the third quarter of 2017, up from 10 times in 2016, according to a recent report by Bain & Co.