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 were recognized at the Canadian Dealmakers gala dinner, held this year on March 5 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 2014…
Lifetime Achievement Award
If Purdy Crawford is remembered for just one deal, it would have to be brokering the restructuring of $32 billion of asset-based commercial paper frozen in the 2007 global financial crisis. The agreement placing the commercial paper into bankruptcy protection, then converting it into long-term bonds, was widely credited with helping unfreeze Canada’s credit market, forestalling a forced liquidation that would have vaporized $20-billion worth of investments.
Crawford, who died in 2014, was a corporate titan who often had a hand in shaping Canada’s business community and markets. In the 1960s he worked with an Ontario government committee drafting a new provincial securities law – the Ontario Securities Act – which laid the foundation for securities laws in other provinces. In 2003 he chaired the Ontario government’s Five-Year Review Committee, which recommended that the Ontario Securities Commission be radically overhauled by splitting its dual roles as both investigator and adjudicator. In 2005, he was appointed chairman of the Ontario government’s panel on a single Canadian securities regulator.
A senior lawyer at Osler, Hoskin & Harcourt LLP, Crawford was also the former chairman of Imasco Ltd. and AT&T Canada. A former chancellor of Mount Allison University and governor of the University of Waterloo, he also sat on the boards of companies such as Canadian National Railway and Maple Leaf Foods.
Investment Bank of the Year Award
RBC Capital Markets
Last year’s winner, RBC Capital Markets, held on to first place in 2014 after advising on an astonishing 48.3 per cent of all ranked and completed deals last year, according to the Thomson Reuters League Table for Canadian M&A. The numbers break down to 34 transactions with a collective value, including net debt, of $51 billion and include megadeals such as Burger King Worldwide Inc.’s $14.6-billion acquisition of Tim Hortons Inc. and Loblaw Companies Ltd.’s $13-billion purchase of Shoppers Drug Mart Corp.
RBC deal teams also advised on transactions such as BCE Inc.’s acquisition of Bell Aliant Inc., Berkshire Hathaway Energy’s purchase of SNC-Lavalin’s equity in AltaLink from SNC-Lavalin Group Inc., and the Jupiter Resources Ltd. acquisition of the Bighorn assets from Encana Corp., among other mergers and acquisitions.
Information Technology Industry Award
OpenText Corp. acquires GXS Inc.
Waterloo, Ontario-based OpenText underscored its commitment to growing its enterprise information management business with the friendly US$1.17-billion deal for GXS, a Maryland-based global e-commerce services provider, which boosts its workforce by 60 per cent. The merged company is expected to serve more than 80,000 customers and support approximately 16-billion annual transactions in the cloud.
Enterprise information management is a field within information technology that focuses on structuring enterprise content management, business process management, customer experience management and business intelligence across an organization. OpenText sees it as the next generation of must-have business software, and the GXS acquisition strengthens its platform with industry-specific expertise in financial services, manufacturing, retail and consumer packaged goods.
The Canadian company has also been pushing its way into the cloud computing market, and GXS has 40,000 customers who use its cloud services to launch products, pay accounts, make e-payments and run their supply chains.
OpenText said the deal was done at 2.4 times GXS’s 2012 revenue of US$487 million, and was being paid for by US$1.07 billion in cash and US$100 million in its common shares. The transaction was expected to be accretive to the company’s adjusted earnings for fiscal 2014.
Advisor to OpenText Corp: Osler Hoskin & Harcourt LLP, Blake, Cassels & Graydon LLP, Cleary Gottlieb Steen & Hamilton
Advisor to GXS Inc: Shearman & Sterling LLP
Advisor to Financial Advisor: Davis Polk & Wardwell LLP
Mining Industry Award
Osisko was in the throes of a hostile takeover bid from giant Goldcorp Inc. when Yamana and Agnico Eagle teamed up as the white knight, providing yet another twist – and an unexpected ending ‒ to one of the most vitriolic hostile campaigns of 2014.
Montréal-based Osisko had turned to the court to stop the Goldcorp offer, alleging it misused confidential information in preparing its bid. The two companies reached an out-of-court settlement just as proceedings were set to begin, but the drama didn’t stop there. Minutes before Osisko announced the friendly deal with Yamana and Agnico Eagle, Vancouver-based Goldcorp disclosed it was planning to launch a proxy battle to replace Osisko’s entire board.
The prize at the heart of both the unsuccessful takeover battle and friendly merger was Osisko’s flagship asset: the Canadian Malartic gold mine in Québec — a large, low-cost asset in a politically stable and mining-friendly jurisdiction. The $3.98-billion deal was priced accordingly.
Osisko shareholders were paid in cash and shares of Yamana and Agnico Eagle as well as shares of Osisko Gold Royalties Ltd., a newly created spinoff that received a 5 per cent net smelter return royalty on production from the Canadian Malartic Mine, a 2 per cent net smelter return royalty on production from other Canadian exploration properties acquired by Yamana and Agnico Eagle, and $155-million cash, among other assets. The deal was completed by plan of arrangement.
Advisor to Agnico Eagle Mines Ltd: Davies Ward Phillips & Vineberg LLP
Advisor to Yamana Gold Inc.: Norton Rose Fulbright Canada LLP, Paul, Weiss, Rifkind, Wharton & Garrison LLP
Advisor to Osisko: Skadden, Arps, Slate, Meagher & Flom LLP, Bennett Jones LLP
Advisor to Special Committee of Osisko: Stikeman Elliott LLP
Advisor to Financial Advisor: Osler Hoskin & Harcourt LLP
Utilities Industry Award
Newfoundland-based Fortis had its eye squarely on the United States when it proposed a friendly deal for UNS Energy. Fortis is the largest investor-owned gas and electric distribution utility in Canada, while Tucson-based UNS, which generates, transmits and distributes electricity and gas, has 656,000 electricity and gas customers mainly in Southeastern Arizona and the western US.
The US$4.5-billion deal, which includes the assumption of US$1.8 billion in debt, means Fortis’s regulated-utility subsidiaries will now serve more than three million electricity and gas customers in Canada and the US. The transaction diversifies the company’s business profile and decreases general risk by spreading earnings across geographic locations and regulatory jurisdictions. Post-acquisition, no more than one-third of Fortis’s total assets are in a single jurisdiction.
Fortis said it expects the experienced UNS management team to play a vital role in enhancing the Canadian company’s business operations. The deal is also expected to provide it with additional resources and financial access, helping it meet capital-intensive challenges posed by increasingly strict environmental controls and new regulatory frameworks. It was predicted the acquisition will add US$1.5 billion to the Fortis capital program between 2015 and 2018.
Advisor to Fortis: White & Case LLP, Davies Ward Phillips & Vineberg LLP, Snell & Wilmer, McInnes Cooper
Advisor to UNS Energy Corp: Baker Botts LLP, Roshka DeWulf & Patten
Advisor to Financial Advisor to UNS Energy Corp: Davis Polk & Wardwell
Advisor to Underwriters and agents: Stikeman Elliott LLP
Advisor to Underwriters: Paul, Weiss, Rifkind, Wharton & Garrison LLP
Foreign Outbound Award
Encana Corp. acquires Athlon Energy Inc.
Encana, one of Canada’s largest producers of natural gas and oil, did the all-cash deal with Texas-based Athlon Energy to gain a foothold in the Permian Basin — now the largest oil-producing area in the US. The transaction was part of Encana’s continued move away from natural gas, and its stubbornly low prices, into the more lucrative area of oil production.
The acquisition had a total transaction value of approximately US$7.1 billion and was Canada’s biggest outbound exploration and production deal ever, Encana’s largest transaction since the company was formed in 2002, and a mega-deal in the country’s energy sector under any measure. Encana pursued a two-part strategy in helping fund the purchase. It raised US$1.46 billion in a spinoff of royalty rights though an initial public offering of PrairieSky Royalty Ltd., and orchestrated a $605-million sale of Clearwater assets to Ember Resources.
With the acquisition of Athlon, Calgary-based Encana is adding 140,000 net acres in a prime position in the Permian basin in western Texas and part of New Mexico, an area acknowledged to be one of North America’s top oil plays. Encana said it intends to invest at least $1 billion in the Permian Basin. Athlon was formed in 2010, with private-equity giant Apollo Global Management LLC its largest investor.
Advisor to Encana Corporation: Paul, Weiss, Rifkind, Wharton & Garrison LLP, Blake, Cassels & Graydon LLP, Vinson & Elkins LLP
Advisor to Athlon Energy Inc.: Latham & Watkins LLP
Value Creation Award
Alimentation Couche-Tard Inc.
When Québec-based Alimentation Couche-Tard closed out 2014 with the US$1.7-billion purchase of US rival convenience operator The Pantry, bringing another 1,500 convenience stores into the fold, it was likely no surprise to those watching the company’s aggressive acquisition strategy fuel an impressive growth in shareholder value.
Couche-Tard, which currently has about 13,100 outlets worldwide, operates the Circle K banner in the US and owns the Mac’s network in Canada. The company’s shares rose 83 per cent in 2014, building on a 63 per cent increase in value in 2013 and 54 per cent the year before that.
While it has done roughly a dozen acquisitions over the last three years, scooping up North-Carolina-based Pantry was seen as a major deal along the lines of the company’s US$2.6-billion purchase of Statoil Fuel & Retail ASA. That transaction, completed in 2012, extended Couche-Tard’s reach across the Atlantic and made it a major player in Europe.
The Pantry purchase boosts its presence in the south-eastern US states and Gulf Coast, making it almost as large as 7-Eleven, the world’s largest convenience store operator. The Canadian company, which sees itself as an industry consolidator, says it intends to try and double its retail footprint to more than 25,000 stores by 2023. Game on.
Advisor to Alimentation Couche-Tard inc.: Davies Ward Phillips & Vineberg LLP, Faegre Baker Daniels LLP
IPO of the Year Award
Encana Corp.’s spinoff of PrairieSky Royalty Ltd.
When Encana announced it was spinning off its royalty business into PrairieSky to help fund its move away from natural gas and increase oil production, the proposed bought deal proved so popular with investors that the offering size was increased to 52-million common shares from 32.5 million, and the price boosted to $28.00 from the $23.00 to $26.50 range.
PrairieSky holds 5.2-million acres of mineral title lands in Alberta and collects royalties from oil companies operating on the properties — many of which date back to railway land grants awarded to an Encana predecessor company in the 19th century.
The offering, co-led by joint book runners TD Securities and CIBC on behalf of a syndicate of underwriters, was the largest energy IPO in Canadian history and Canada’s largest IPO since 2000. It resulted in $1.46 billion of gross proceeds for Encana, which retained a 60 per cent interest in PrairieSky. Following the exercise of the over-allotment option by the underwriters, the company’s aggregate gross proceeds were increased to $1.67 billion and Encana’s retained interest in PrairieSky was cut to 54 per cent.
Encana announced in September it was selling its remaining stake in the royalty company in a $2.6-billion deal to help fund its change in strategic direction.
Advisor to Encana Corporation: Paul, Weiss, Rifkind, Wharton & Garrison LLP, Blake, Cassels & Graydon LLP, Vinson & Elkins LLP
Advisor to Athlon Energy Inc.: Latham & Watkins LLP
Media & Telecommunication Industry Award
Shaw Communications Inc. acquires ViaWest Inc.
Investing in data centres to handle the exploding demand for Internet storage is a growing trend among Canadian telecommunications companies. In 2014, Calgary-based Shaw Communications started construction of its first Shaw Business data centre, due to open in the first half of this year. But the acquisition of ViaWest, a US data centre and cloud-services provider, helped the company move into the all-important data-centre sector almost overnight while at the same time boosting its business-data services and cloud capabilities.
ViaWest, which has its head office in Greenwood, Co., has 27 data centres, mostly in the US southwest. The privately held company also offers a range of services from data security, backup and monitoring to complex hosting software for Internet-based applications, and dedicated servers for e-commerce, streaming media, security, managed backup, graphical statistics and other customized needs.
The US$1.2-billion purchase price includes the assumption of US$370 million of net debt. Shaw said it plans to fund the deal using cash and its existing credit facility, and said the transaction would have no material effect on its free cash flow.
Advisor to Shaw Communications: Davies Ward Phillips & Vineberg LLP, Simpson Thacher & Bartlett LLP
Advisor to ViaWest: Paul, Weiss, Rifkind, Wharton & Garrison LLP
Deal Team of the Year Award
WSP Global Inc.
WSP Global’s deal team worked on several transactions last year, pulling off a coup in one in particular: the US$1.4-billion cash purchase of Parsons Brinckerhoff Group Inc., a global engineering and design giant. The Canadian company reportedly beat out several strategic buyers and private-equity firms that were also making a run for Parsons when it was put up for sale by UK parent Balfour Beatty PLC.
The deal, which creates a professional services giant of nearly 32,000 employees, was designed to increase Montréal-based WSP’s footprint in the US. It also expands the company’s presence in the UK and gives it greater profile in Asia and Australia, key growth regions. WSP expects the acquisition to result in cost savings of US$25 million a year over two years.
The purchase was financed through a US$502-million bought deal public offering, a private placement – with the Caisse de dépôt et placement du Québec and Canada Pension Plan Investment Board, both long-time investors in WSP, providing US$400 million – and new credit facilities.
In 2014, the company also acquired Alberta-based Focus Group Holding Inc., an engineering and geomatics firm that serves the oil and gas industry in Western Canada. The purchase, for about $366 million in cash, was also partially paid for through a bought deal offering as well as a private placement.
Advisor to WSP Global: Hogan Lovells, Stikeman Elliott LLP, McMillan LLP
Financial Industry Award
Element Financial Corp. acquires PHH Arval
Element Financial pushed further into areas abandoned by the big banks following the 2008 financial crisis with this friendly US$1.4-billion all-cash deal for the auto-fleet leasing business of PHH Corp. Toronto-based Element provides equipment financing for industrial, aerospace and automotive equipment leasing. The purchase of PHH Arval, a Maryland-based unit of Avis Budget Group, Inc., expands its domestic fleet-management business in the US, creating the opportunity for synergies.
The transaction added more than $4.6 billion in new assets, including more than $4 billion of net investment in fleet leases, to Element’s stable, bringing the young company’s total assets to approximately $10 billion.
Element said it would raise US$1.1 billion in new capital to help pay for the acquisition: US$750 million of subscription receipts, US$250 million of extendible convertible unsecured subordinated debentures and US$100 million of preferred shares. The company said it expects the deal to add more than 10 per cent to its adjusted operating and cash earnings per share in 2015 and 2016.
Founded in 2011, Element’s stock has risen about 250 per cent since the company went public at $4.20 a share.
Advisor to Element Financial Corporation: Blake, Cassels & Graydon LLP, Cravath Swaine & Moore LLP, Dechert LLP
Advisor to PHH Arval: Kirkland & Ellis LLP, Stikeman Elliott LLP, White & Case LLP, Blake, Cassels & Graydon LLP
Advisor to JPMorgan: Simpson Thacher & Bartlett LLP
Advisor to Underwriting syndicate: Wildeboer Dellelce LLP
Advisor to Lenders under the facility: Dentons Canada LLP, Mayer Brown LLP
Materials Industry Award
Chemtrade Logistics Income Fund acquires General Chemical Holding Co.
The US$900-million purchase of General Chemical from private-equity firm American Securities LLC was transformative for the Canadian company, which had a market capitalization slightly under US$700 million when it announced the acquisition. Management of the Toronto-based company called it a “historic event” that would add significant size, scale and scope to its existing product and service platform.
Chemtrade is one of North America’s largest suppliers of sulphuric acid, liquid sulphur dioxide and sodium hydrosulphite, and a leading processor of spent acid. It is also a regional supplier of sulphur, sodium chlorate, phosphorous pentasulphide, zinc oxide and water treatment chemicals. Parsippany, New Jersey-based General Chemical is a North American manufacturer of a broad portfolio of inorganic chemical products with three business units: water treatment chemicals, sulphuric acid and specialty chemicals. It operates 45 facilities across the US and Canada, employing approximately 540 people.
The all-cash transaction was financed through a US$1-billion syndicated senior secured credit facility consisting of a US$600-million term loan and a US$400-million revolver with a US$150-million optional accordion, and the net proceeds of an offering of 18.17-million subscription receipts that raised gross proceeds of $345.2 million.
Advisor to Chemtrade Logistics Income: Covington & Burling, Osler Hoskin & Harcourt LLP
Advisor to American Securities LLC: Blake, Cassels & Graydon LLP, Weil Gotshal & Manges
Foreign Inbound Award
Burger King Worldwide Inc. acquires Tim Hortons Inc.
Investors in Burger King and Tim Hortons instantly applauded the blockbuster $14.6-billion merger, seeing both tax savings and strategic rationale in the combination. The transaction – which created the world’s third-largest fast-food restaurant group – was structured as a tax inversion, with Burger King headquartering the new combined entity in Canada. Regulators were more cautious. Tim Hortons is an iconic Canadian brand and its proposed acquisition by a large US company was subject to review under the Investment Canada Act, which gives the federal government the right to block foreign takeovers if they are not deemed to be of “net benefit” to Canadians.
It took four months for the government to announce its decision and, when it did, it revealed that it had received a number of undertakings before granting approval. Burger King had to agree to maintain Canadian jobs, to list the worldwide fast-food company’s shares on the TSX and reserve at least half the Tim Hortons board seats for Canadians. Tim Hortons will be managed as a distinct brand, with no co-branded locations in Canada or the US, and Burger King also agreed to accelerate the pace of opening new locations in the US and globally.
The new Canadian-domiciled company, branded Restaurant Brands International, will have over $23 billion of annual sales. The tax-inversion structure means it will be able to bring overseas profits back home without having to pay US tax on it.
Advisor to Burger King Worldwide Inc: Davies Ward Phillips & Vineberg LLP, Kirkland & Ellis, Paul, Weiss, Rifkind, Wharton & Garrison LLP
Advisor to Tim Hortons Inc: Osler Hoskin & Harcourt LLP, Wachtell Lipton Rosen & Katz
Advisor to Berkshire Hathaway: Munger, Tolles & Olson
Energy Industry Award
Canadian Natural Resources jumped at the chance to buy Devon’s Canadian oil and natural gas fields when they came up for sale in a bet that gas prices will rally amid resurgent demand. The deal was 70 per cent weighted towards natural gas, CNRC said, and includes six natural gas plants.
The Devon properties are close to – in some cases right next to – the company’s existing operations in western Canada. The Calgary company called it a natural fit, saying it was able to move quickly because it had “home field advantage.” Canadian Natural Resources put its bid in before the data room process had closed.
Devon, headquartered in Oklahoma City, said it decided to sell off the chunk of Canadian assets because it wants to concentrate on its core assets and the properties weren’t able to compete for capital internally with the company’s US light-oil opportunities. The sale excludes Devon’s Horn River assets in northern BC and heavy oil properties in Alberta.
The deal was seen as a bit of a strategic about-face for CNRL, the country’s largest independent oil producer. A month earlier the company dropped plans to sell some of its shale gas-rich Montney properties, which straddle the border of northern Alberta and British Columbia, after failing to attract a suitable offer. Canadian Natural resources said the assets being acquired from Devon include a royalty revenue stream that was expected to earn about $75 million in cash flow in 2014.
Advisor to Canadian Natural Resources Ltd.: Burnet, Duckworth & Palmer LLP
Advisor to Devon: Osler, Hoskin and Harcourt LLP
Legal advisors listed are based on information provided by the winning companies at press time.