The private equity market in Europe remains at least as buoyant as in Canada and the United States and, despite political and market uncertainty, PE M&A activity remains high, Osler, Hoskin & Harcourt LLP Partner Mary Abbott writes. However, the realities of sourcing and executing on deals remains a challenge, as it does globally. Despite this shared reality, deal-making in Europe has some features or norms not common in North America that prudent businesses (and investors) can leverage to their advantage. Some of them arguably make deal execution more predictable and completion more certain.
Underwriting banks and leveraged loan investors are struggling to analyse the impact of technological disruption on the business models underpinning private equity buyouts, as they try to dodge bullets by avoiding lending to companies that could be rendered obsolete by the ‘Amazon effect’, Reuters reported. KKR-owned U.S. retail giant Toys ‘R’ Us sent shock-waves through the market when it filed for Chapter 11 bankruptcy protection in September, citing the “unrelenting competition from e-commerce” as key to its predicament. “Technology is undoubtedly a threat to traditional business models: this is definitely a topic discussed in every credit committee. The first question everyone asks is: ’What’s Amazon doing?’” said Simona Maellare, global co-head of financial sponsors coverage at UBS.
Private equity-backed Canadian waste management company GFL Environmental Inc is seeking to raise as much as $1 billion in an initial public offering that could be filed as early as the first quarter, sources told Reuters. A $1 billion IPO would be the biggest Canadian listing since Kinder Morgan Canada Ltd raised $1.7 billion early this year, and would value GFL at nearly $5 billion, the sources said. It would provide an exit for investors including U.S. private equity firm HPS Investment Partners and Macquarie Infrastructure Partners III, a fund linked to a unit of Australian financial services firm Macquarie Group. While an IPO is one of several ways to unlock value, no decision has been made to proceed with an offering, GFL General Counsel Joy Grahek said. GFL is also backed by Canadian private equity firm Hawthorn Equity Partners.
Canadian miner Dalradian Resources Inc has filed a planning application and secured a new tranche of funds to build Northern Ireland’s first major underground gold mine, Reuters reported. Dalradian acquired mineral rights in 2009 to more than 80,000 hectares of land in Northern Ireland, including the Curraghinalt gold deposit. This week it announced that it had submitted the planning application and secured an extra $78.25 million in funding from Orion Mine Finance Group and Osisko Gold Royalties Ltd, two big North American mine finance firms. The application is for Dalradian to run the proposed mine for an initial 20 years, though the company says it has the potential to produce gold for decades longer.
Renova Energia SA’s board has approved Brookfield Asset Management Inc’s proposal to acquire a controlling stake in the Brazilian renewable energy company for 1.4 billion reais (US$433 million), Reuters reported. Brookfield will buy new units, which consist of preferred and common shares, for 6 reais each, according to the filing by Renova stakeholder Light SA. Reuters was first to report the negotiations between Brookfield and Renova in March. The deal, which began with a proposal to acquire a minority stake, evolved into an offer to control the renewable energy company in July. The long-awaited sale is part of an asset divestment program that Companhia Energetica de Minas Gerais, which controls Renova, began to pay off debt.
BGL Group, owner of Comparethemarket.com, said this week it would sell a 30 percent stake for about 675 million pounds ($1.14 billion) to Canada Pension Plan Investment Board instead of listing its shares in London, Reuters reported. BHL, the owner of BGL Group, will retain a majority shareholding in the business and the deal is expected to be completed by the end of April 2018, it said. Peterborough, U.K.-based BGL Group distributes insurance and household financial services to 8.5 million customers and runs price comparison websites Comparethemarket.com in Britain and LesFurets.com in France. CPPIB will nominate a non-executive director to the company's board with the deal's closing.
Rio Tinto, Canada’s Wealth Minerals and Chinese private equity firm GSR Capital are considering a bid for a stake in Chilean lithium producer SQM (Sociedad Quimica Y Minera de Chile), banking sources told Reuters. Canada’s Potash Corp of Saskatchewan must divest its 32 percent stake in the Chilean company as part of its merger with rival Agrium Inc. Given SQM’s market capitalization of around US$15 billion, according to Reuters data, this would give a value to the stake of US$4.8 billion. SQM said it has received significant interest from potential acquirers as demand rises for lithium, essential for batteries used in electric vehicles.
Private equity firms are awash in cash, with nearly US$1 trillion of available capital, but the industry is facing internal competition as limited partner investors seek to play a more active role in buyouts, Reuters reported, quoting David Rubenstein, co-founder and co-CEO of the Carlyle Group. The structure and composition of PE funds will change significantly as LPs that would previously have invested in the funds increasingly branch out into arranging buyouts themselves, Rubenstein said. He predicted that sovereign wealth funds will replace U.S. public pension funds as the largest source of capital for buyout firms, and said that retail investors will also play a more significant role going forward.
Onex Corp has closed fundraising for its fifth private equity flagship fund, bringing in US$7.15 billion in committed capital. Onex Partners V, the largest fund raised by the Toronto investor in its 33-year history, exceeded its US$6.5 billion target by 10 percent. It is also 25 percent larger than Onex Partners IV, which raised US$5.7 billion in 2014. Fund V secured commitments from both new and existing limited partners, including pension plans, sovereign wealth funds, and other institutional investors, as well as a US$2 billion commitment from Onex. With the fund’s close, the firm now has more than US$30 billion in assets under management.
As Hudson’s Bay Co steps up the pace of extracting value from its US$5 billion property portfolio, the department store chain’s shareholders want it to reduce debt, return cash to them, and not invest the proceeds in traditional retail operations, Reuters reported. Hudson’s Bay is not new to selling real estate, but its actions are under greater scrutiny amid rising tensions between the company and U.S. activist hedge fund Land & Buildings Investment Management. The fund wants the Canadian owner of Saks Fifth Avenue and Lord & Taylor to sell or convert stores to alternate uses and transform itself into a real estate play.