The Canadian Dealmakers Awards honour companies and C-suite leaders for transactions that have significantly impacted their industries through innovation and growth, establishment of best practices, enhancement of customer needs and products, and/or creation of value
For photos of the event, click here.
Deloitte, Lexpert, The Globe And Mail and Thomson Reuters (Financial & Risk) created the Canadian Dealmakers program in 2007 to celebrate deals – and the dealmakers behind the mergers, acquisitions, and public offerings that shape Canada's corporate landscape.
A panel of prominent Canadian business leaders select the transactions deserving of special recognition. Winning deals can be singled out for a combination of value, complexity, novelty, promoting growth, and/or creating stakeholder value.
Once the panel makes its decisions, the Winners are recognized at the Canadian Dealmakers gala dinner, held this year on February 27 at the Fairmont Royal York Hotel in Toronto. The event is a highlight for the business community, bringing together leading decision-makers and strategists from the M&A, corporate finance, and legal sectors to network and celebrate. Here are the Canadian Dealmakers Award Winners for 2013 …
MINING INDUSTRY AWARD
FIRST QUANTUM MINERALS LTD. ACQUIRES INMET MINING CORPORATION
> When Vancouver-based First Quantum Minerals unveiled an unsolicited hostile takeover bid for Inmet Mining, the board determined the “highly conditional” $4.9-billion offer was not in the best interest of shareholders. First Quantum sweetened its bid to $5.1 billion, but the copper and zinc miner remained opposed, as it said it still undervalued the company and its 80 per cent stake in the Cobre Panama project – Inmet's crown jewel. So First Quantum decided to go directly to shareholders to explain its proposal.
The company suggested it could bring the US$6.2-billion open-pit copper development into production faster and significantly more cheaply than Toronto-based Inmet. Aspirationally, Cobre Panama will become one of the world's largest copper mines when it begins production scheduled for 2016. With Inmet unable to find a “white knight,” those arguments proved persuasive, and, in the end, nearly 93 per cent of the outstanding shares were tendered to the offer.
First Quantum further suggested combining the two companies will create one of the fastest-growing copper producers with the potential to generate more than 1.3-million tonnes of copper annually by 2018. It has predicted the merged company will establish itself as a top-five copper producer within five years.
MEDIA & TELECOMMUNICATIONS INDUSTRY AWARD
BCE INC. ACQUIRES ASTRAL MEDIA INC.
> When BCE initially proposed a friendly US$3.3-billion takeover of Astral Media, the Canadian Radio-television and Telecommunications Commission (CRTC) did not grant approval. BCE already owned the CTV Network, while Astral owned 84 radio stations and 25 specialty channels including HBO Canada, the Movie Network, the Family Channel, and Super Écran. The Regulator held that the combination would concentrate more market power in the hands of one of Canada's largest telecommunications companies than was desirable.
BCE went back to the drawing board, contending that it needed to increase TV programming to compete with global online forces such as Netflix, and to remain competitive in Quebec, where Quebecor Media Inc. is the dominant player.
The company returned with another application to the CRTC with revised plans that included selling off 10 of Astral's radio broadcast licences and 11 TV channels including Teletoon, The Family Channel, the Cartoon Network, Disney XD, and MusiquePlus. The company had even lined up a tentative $400.6-million offer from Corus Entertainment for several assets.
This time the CRTC approved – although it imposed conditions. BCE is prohibited from imposing “restrictive bundling requirements” on providers looking to carry higher-profile channels like The Movie Network. The company is also required to spend $247 million on “tangible benefits” such as funding Canadian producers of feature films and TV programs, Canadian film festivals, consumer education, support for emerging artists, and local programming initiatives, and to keep local TV stations open until 2017.
INFORMATION TECHNOLOGY INDUSTRY AWARD
DAVIS + HENDERSON CORPORATION ACQUIRES HARLAND FINANCIAL SOLUTIONS
> Toronto-based Davis + Henderson is one of Canada's oldest companies, founded in 1875. But the US$1.2-billion deal for rival Harland Financial Solutions was all about the future, expanding both cross-border operations and cutting-edge technology offerings for banks and credit unions. Harland is a top four core-banking technology provider in the US, supplying about 5,400 US financial institutions with systems used in core banking, lending, and compliance and channel management.
The friendly acquisition gives D+H a post-acquisition client base of roughly 6,200 financial institutions, and grows its offerings in branch automation, mobile, and online banking and commercial lending. It also provides the Canadian company with an on-the-ground presence in important markets. In addition to its Florida headquarters, Harland has 16 other offices throughout the US and in Dublin, Tel Aviv, and Trivandrum, India.
Davis + Henderson expects the combined offerings to fuel cross-selling synergies and create new revenue opportunities, contributing to “high single-digit” earnings growth in 2014. It has estimated combined revenue pro forma to be about $1.1 billion. To help finance the acquisition, D+H made a deal with a syndicate of underwriters co-led by Scotiabank, RBC Capital Markets, and CIBC to sell $400-million of subscription receipts and $200 million of unsecured debentures on a bought-deal basis.
IPO OF THE YEAR AWARD
BRP INC. GOES PUBLIC
> The plan to take the former recreational products group of Bombardier Inc. public was sketched several years ago; but as fallout from the financial crisis caused sluggish sales of its popular Ski-Doos and Can-Am Spyder three-wheel roadsters, BRP hit the brakes on the plan. With the Canadian IPO market rebounding in the third quarter of 2013, and competitors such as Arctic Cat and Polaris trading at rich multiples, BRP decided the time was right.
The timing was optimal. Joint underwriters, BMO Capital Markets, RBC Capital Markets, UBS, and Citigroup priced an upsized 12.2-million share offering at $21.50 – the top of the $18.50-$21.50 range – on a deal originally marketed at 11.7-million subordinated shares. BRP was reportedly the hottest consumer-goods company to hit Canadian market since the $783-million Tim Hortons IPO in 2006, with Reuters reporting total demand exceeded the number of shares offered by 10 times. The offering raised $262.3 million and was among the year's largest.
BRP was spun off from Bombardier in 2003 by a consortium led by Bain Capital, the Boston-based private equity firm that held an estimated 50 per cent stake. Quebec's Bombardier and Beaudoin families, whose ancestor Joseph-Armand Bombardier invented the recreational snowmobile, held about 35 per cent while the Caisse de dépôt et placement du Québec held 15 per cent. The deal leaves the original owners with voting control of the company.
FOREIGN OUTBOUND AWARD (US)
HUDSON'S BAY COMPANY ACQUIRES SAKS INCORPORATED
> HBC Chief Executive Officer Richard Baker is regarded as a very smart shopper. He lived up to his reputation with the $2.9-billion all-cash deal to purchase Saks, which creates an upscale North American fashion retail empire that brings the storied New York banner into Canada and under the same roof as the iconic Hudson's Bay and Lord & Taylor brands.
The merged company will operate 320 stores: 179 of them full department stores, 72 outlet stores and 69 home stores, along with three e-commerce sites. It will have combined annual sales of $7.2-billion based on 2012 figures.
But there's more to this than meets the eye. Baker, a former US real-estate magnate, said the acquisition will increase shareholder value by boosting HBC's growth potential and generating efficiencies of scale – and also by adding to the company's real estate portfolio. Saks owns roughly two thirds of its stores, and real estate brokers peg the value of the New York flagship alone at over $1-billion, which suggests that the Saks real estate is worth $1.5 billion, or over half the overall purchase price.
Hudson's Bay financed the acquisition by issuing $1 billion in new equity, and borrowing US$2 billion in a senior secured loan, US$300 million in a junior secured term loan, and US$950 million in an asset-based loan. HBC is expected to create a Real Estate Investment Trust, or REIT, containing the company's valuable real estate assets and sell some of it to the investing public to help lower its debt leverage.
FINANCIAL INDUSTRY AWARD
ELEMENT FINANCIAL CORPORATION ACQUIRES CANADIAN FLEET PORTFOLIO OF GE CAPITAL CANADA INC.; AND STRATEGIC PARTNERSHIP WITH GE CAPITAL FLEET SERVICES IN THE US
> This was a two-pronged friendly deal that saw Toronto's Element purchase GE Capital's Canadian fleet-leasing business for $570 million. The deal covers GE Capital's entire Canadian fleet of cars, light- and medium-duty trucks, as well as the operational resources required to service the business, including software licenses. The former GE assets will be combined with TLS Fleet Management, Element's existing business. The second prong is a long-term strategic alliance agreement that will see Element and Minnesota-based GE Capital Fleet Services work together on pursuing cross-border fleet-management opportunities.
Element – Canada's leading independent equipment-finance company – announced it had arranged a $200-million bought deal and expanded its debt facilities to help fund the GE Fleet acquisition as well as future growth plans. And it seems like there are plenty of those.
Before 2013 was over, Element announced a strategic alliance with Trinity Industries to provide lease financing for up to $2 billion worth of railcars over the next two years, as well as an agreement with a subsidiary of GE Capital to acquire a portfolio of finance assets secured by helicopters for approximately US$245 million. The pace of acquisitions suggests the three-year-old company is going to be a mover on Canada's deal landscape for some time to come.
VALUE CREATION AWARD
HIGH LINER FOODS INC. ACQUIRES THE US SUBSIDIARY AND ASIAN PROCUREMENT OPERATIONS OF ICELANDIC GROUP H.F.
> When High Liner Foods closed the US$233-million deal to buy the US subsidiary and Asian operations of Icelandic Group, it doubled its US business, transforming it into North America's largest supplier of frozen and prepared seafood to restaurants, hotels, schools and hospitals virtually overnight.
Icelandic USA was a leading player and key competitor in the US food service market. High Liner acquired the company's Virginia processing plant in the friendly all-cash deal, along with a processing plant in Dalian, China, procurement companies that source seafood, and several well-known brands. It also signed a seven-year royalty-free licensing agreement for the use of the Icelandic brand in North America and a long-term distribution agreement that will ensure High Liner continues to supply seafood and fish from Iceland under the Icelandic label.
High Liner, whose roots in Nova Scotia date back to 1899, said the acquisition gives it stronger purchasing power and a more efficient supply chain, thus increasing shareholder value. To fund the transaction and new growth, the company increased its existing working capital facility to US$180-million and arranged a US$250-million syndicated term loan. Management is expecting annual synergies of US$16-18 million as a result of the acquisition.
CONSUMER BUSINESS INDUSTRY AWARD
SOBEYS INC. ACQUIRES CANADA SAFEWAY LIMITED
> When Sobeys' parent company bought Safeway's Canadian division, the $5.8-billion friendly deal instantly redrew Canada's grocery landscape, beefing up the Nova Scotia-based chain's presence in Western Canada and solidifying its position as Canada's second-largest national grocery retailer. Paul Sobey, Empire's president and CEO, revealed on closing that he had been looking at the Safeway stores since 2000, calling the acquisition “a great day” in the company's 106-year history.
Sobeys owned or franchised about 1,300 stores in Canada under the Sobeys name, as well as IGA, Foodland, FreshCo, Price Chopper, and Thrifty Foods. Safeway Canada owned 213 stores, 199 in-store pharmacies, 62 gas stations, 10 liquor stores, four distribution centres and 12 manufacturing facilities, the majority of which are located in key Western Canadian markets such as Vancouver, Calgary, Edmonton and Winnipeg. The Competition Bureau required Sobeys to sell 23 Western stores as a condition of approving the acquisition.
Empire paid for the deal through a series of equity and notes offerings, as well as by selling 68 of Safeway real-estate properties in a $1-billion sale-leaseback deal with Crombie Real Estate Investment Trust. Crombie REIT is an Empire spinoff created in 2006 to handle the company's real estate.
FOREIGN OUTBOUND AWARD (GLOBAL)
PACIFIC RUBIALES ENERGY CORPORATION ACQUIRES PETROMINERALES LTD.
> Toronto-based Pacific Rubiales Energy acquired Calgary-based explorer and producer Petrominerales for $1.6 billion in a bold bid to reduce its transport costs in the Colombian market. The acquisition – one of Canada's largest energy deals of the year – was financed with cash and loans and carried out through a plan of arrangement.
Pacific Rubiales, which is based in Bogota and listed on both the Bogota and Toronto stock exchanges, is one of the world's fastest-growing major crude oil players, which produces heavy crude oil and natural gas mainly in Colombia and Peru. The deal changes the way it moves its oil because, among other assets, Petrominerales produces low-density light oil which Pacific Rubiales can use to thin its heavy crude, making it easier to transport. Petrominerales also owned a pipeline in Colombia, which will allow Pacific to stop trucking oil, thus cutting shipping costs while increasing production.
Pacific Rubiales said the deal's synergies provide “immediate value” while growing production, reserves and cash flow at attractive metrics. It also said the former Petrominerales light oil and pipeline are a strategic hedge for its future supply and will help ensure stability of cost, security of volume, and pipeline transportation. Petrominerales shareholders were paid $11 in cash per share, totaling roughly $935 million, plus a common share in a newly formed exploration and production company that was created from the company's Brazilian assets plus $100 million in cash. Pacific Rubiales also assumed $640 million of net debt, which included convertible bonds, and said it planned to pay some of that off by spinning off infrastructure assets held by the two companies.
HEALTHCARE INDUSTRY AWARD
VALEANT PHARMACEUTICALS INTERNATIONAL, INC. ACQUIRES BAUSCH + LOMB HOLDINGS INCORPORATED
> The Valeant Pharmaceuticals $8.7-billion cash deal for Rochester-based Bausch & Lomb was seen as a bet that an aging population will be willing to spend more on eye care. But the acquisition was also a bet on the appetite of debt markets, with the company borrowing most of the purchase price in bank debt and bonds, topped up by a $2-billion secondary share offering.
The purchase, Valeant's largest to date, gives the company a strong footprint in China and other populous emerging markets, and places it among the upper ranks of global pharmaceutical players. Bausch & Lomb had 12,000 employees in 100 countries, and sold contact lenses, pharmaceuticals and surgical instruments. Valeant says it will operate in all three of the business sectors, and that the Bausch & Lomb name will be maintained. It has already folded its own ophthalmology unit into the new Bausch & Lomb division, which dramatically boosts the size of its ophthalmology business and places it more directly in competition with heavyweights like Novartis AG, Allergan Inc., and Johnson & Johnson.
Roughly $4.5 billion of the $8.7 billion raised for the deal went to Bausch & Lomb's owners, an investor group headed by private equity firm Warburg Pincus LLC. The remaining $4.2 billion was used to repay the eye care company's debt, which is a move Valeant said would allow it to realize cost savings of US$800 million by the end of 2014.
DEAL TEAM OF THE YEAR AWARD
VALEANT PHARMACEUTICALS INTERNATIONAL, INC. FOR THEIR MULTIPLE ACQUISITIONS, PARTICULARLY BAUSCH + LOMB HOLDINGS INCORPORATED AND OBAGI MEDICAL PRODUCTS INC.
> The Valeant deal team has been remarkably busy; it has been on the acquisition trail since Biovail Corp. took over the company in 2010, and assumed its name. Valeant has since pursued high-margin health-care rivals that operate in fast-growing emerging markets, especially those in sectors where the customer pays out-of-pocket, bypassing cost-sensitive insurers. The blockbuster $8.7-billion takeover of Bausch & Lomb is a perfect example, as is the $2.6-billion purchase of Medicis Pharmaceutical Corp. with its popular anti-aging drug Restylane.
Quebec-based Valeant also bought Solta Medical Inc., which makes Fraxel and Liposonix; Ortho Dermatologics, which manufactures Retin-A and Renova; Obagi Medical Products Inc., which makes skin care products and peels; and Dermik Laboratories Inc., which manufactures Sculptra, an injectable wrinkle corrector. Its deal team negotiated a US$525-million acquisition of PharmaSwiss SA, then used the company to take over Moscow-based Ekomir Pharma, and acquire majority interest in Poland's Przedsiebiorstwo Farmaceutyczne LEK-AM Sp zoo. The company has also completed deals in many other markets.
This is far from a complete list, but there is no doubt that the pace and scope of acquisitions has kept members of the company's deal team extremely busy. And withCEO Michael Pearson saying that Valeant's aim is to become one of the top five global pharmaceutical companies by market capitalization within the next three years, it seems like they'll remain that way for some time to come.
FOREIGN INBOUND AWARD
CNOOC LTD. ACQUIRES NEXEN INC.
> The contentious $15.1-billion takeover of Calgary-based Nexen by China's state-owned CNOOC came in for a high level of scrutiny, taking more than seven months to close. It required the approval of Industry Canada, Canadian and US stock market Regulators and the US Committee on Foreign Investment, which had previously declined CNOOC's proposed $18.5-billion bid for Unocal on national security concerns.
The deal was the single largest foreign takeover by a Chinese company. It gives CNOOC new offshore production in the North Sea, the Gulf of Mexico, and off Western Africa, as well as producing properties in the Middle East and Western Canada, with control of the Long Lake oil sands project and billions of barrels of reserves contained in the oil sands, the world's third-largest crude storehouse.
CNOOC's undertakings to the Canadian government were not disclosed.
ENERGY INDUSTRY AWARD
BONTERRA ENERGY CORP. ACQUIRES SPARTAN OIL CORP.
> Bonterra made its unsolicited all-stock offer for Spartan three weeks after the Calgary-based company had recommended to its shareholders that they accept an offer from another suitor, Pinecrest Energy Inc. But Spartan did the math and changed its mind, saying Bonterra's all-stock offer and proposed dividend increase made it the mathematically preferred match. The merger agreement with Pinecrest was terminated. The deal was valued at approximately $480 million.
Spartan is an explorer and producer company with holdings in Alberta's Cardium and Saskatchewan's Bakken plays. Bonterra's properties are also concentrated in Western Canada. Bonterra said the combination would create a “dominant Cardium-focused light oil producer,” and that the merger was an opportunity for Spartan shareholders to gain a one-third ownership in an established, dividend-paying company with a history of per share production and dividend growth.
Spartan shareholders liked the logic. The stock swap was approved by 99.52 per cent of votes cast at a special shareholders meeting and within six weeks of receiving the offer, the arrangement was approved by the Court of Queen's Bench of Alberta and the deal closed.
INDUSTRIALS INDUSTRY AWARD
CCL INDUSTRIES INC. ACQUIRES AVERY DENNISON CORPORATION'S OFFICE & CONSUMER PRODUCTS AND DESIGNED & ENGINEERED SOLUTIONS BUSINESSES
> Toronto-based CCL paid US$500 million to purchase Avery Dennison's office and consumer products unit and its designed and engineered solutions business in a deal that boosts the Canadian company's labels lineup and puts it into the office products market. The two former Avery divisions had combined revenues of US$910 million in calendar 2012 – roughly the same amount CCL generated from its worldwide operations, which put CCL's pro forma annual revenue above $2-billion for the first time.
CCL, which operates 87 production facilities in 25 countries, is the world's largest converter of pressure-sensitive and film materials for the consumer packaging, healthcare, automotive, and consumer-durables industries. It is also a leader in specialty labels. Pasadena-based Avery makes pressure-sensitive labels for use in consumer products and durable goods, while its office-products business is known for labels, sticky notes, binders, and pens such as Hi-Liters.
CCL entered into a new $700-million syndicated credit agreement with Bank of Montreal in connection with the all-cash transaction, which is its largest-ever deal. Management said it expects the transaction to be accretive on an earnings-per-share basis in 2014 and beyond. Avery had planned to sell the office products business to 3M Co of St. Paul, Minn., but the deal was scuttled after the US Justice Department withheld approval because of antitrust concerns.
LEAGUE TABLE AWARD FOR TOP CANADIAN BANK
RBC CAPITAL MARKETS
> Recognizing RBC's move up the global cross-asset investment banking rankings from position 11 in 2012 to 10 in 2013, this award highlights RBC's continued presence at the top of the Thomson Reuters League Table for Canadian M&A in 2013. Having grown its M&A groups globally in recent years, this award represents RBC's continued ability to provide value to its Canadian clients despite continued market challenges. RBC's efforts resulted in a 40 per cent market share of the M&A deal volume in Canada in 2013.
LEAGUE TABLE AWARD FOR TOP CANADIAN MID-MARKET BANK
A TIE BETWEEN NATIONAL BANK FINANCIAL AND GMP SECURITIES L.P.
> This award is shared between GMP Securities L.P. and National Bank Financial to recognize their strength in Canadian mid-market M&A deals in 2013. Both banks had an equal share of the deal volume for Canadian M&A, and their successes highlights the continued importance of the energy, mining, and real estate sectors in Canada as clients look for growth and to strengthen their local presence.
PRIVATE CAPITAL OFFERING - PRIVATE EQUITY
CANADA GOOSE SELLS MAJORITY STAKE TO BAIN CAPITAL
> When US private equity powerhouse Bain Capital bought a majority stake in Canada Goose it was acquiring not just the maker of high-end winter outerwear, but a modern-day Canadian icon. Founded in 1957, Canada Goose has remained committed to manufacturing its coats entirely in Canada despite the prospect of cheaper costs offshore. That commitment was written into the deal with Bain. Dani Reiss, the grandson of the company's founder, also retains his position as chief executive and a significant minority stake in the company.
Canada Goose had originally hired Canaccord Genuity, an investment bank, to find a minority shareholder to help bring more equity into the company. Reiss said Bain's majority offer won out partly for its ability to help Canada Goose grow globally in the US as well as in Asian markets like South Korea.
Canada Goose has grown briskly in the past decade, with annual revenue of roughly $150-million in 2013 compared to $5-million in 2001. The company has 1,000 employees and operates in more than 50 countries around the world. The Reiss family were its sole shareholders prior to the Bain deal. Terms of the sale were not disclosed.
