‘Goliath’ Leads Giant Canadian Pension Purchases

Canada’s thirst for real assets has seen international purchases this week, including one of the largest since the onset of the financial crisis.

(July 20, 2012) — The largest Canadian pension funds have been putting their cash to work this week and buying up flagship companies either side of the Atlantic to such an extent that one has even created a fittingly-named special purpose vehicle for its deal.

The Ontario Teachers’ Pension Plan (OTPP) used “Goliath” to make a final bid for a chain of indoor sports facilities that are listed as a public company on the London Stock Exchange (LSE).

Goals Soccer Centres PLC operates recreational facilities in the United Kingdom, United States, and South Africa. This morning, the directors of the company recommended OTPP’s cash offer of £73.1 million to shareholders.

Three of the largest stakeholders – Universities Superannuation Scheme, Aviva Investors, and Henderson Global Investors – which hold over 13% of the company, have already backed the deal, according to an announcement on the LSE.

The fittingly-named “Goliath” special purpose vehicle was created solely for this purchase, a spokesman for OTPP told aiCIO.  The deal has not yet completed, but after several months of negotiations it looks set to go ahead.

Yesterday, the Canadian Pension Plan Investment Board (CPPIB) announced it had partnered with private equity firm BC Partners and senior management of the target firm to buy out a US cable company. The deal would be one of the largest since the collapse of investment bank Lehman Brothers in 2008.

Suddenlink Communication, the business name for Cequel Communications Holdings, is to be purchased for $6.6 billion. The deal is expected to close in the last quarter of this year.

Canadian pension funds had a 20% allocation to assets outside the traditional equities/bonds portfolio at the end of 2011, according to a survey by consultants Towers Watson. Over the last 10 years, Canada saw a 10.5% growth rate in assets (in US dollar terms), the consultants said, which was just behind that of Australia and Brazil, which have relatively immature pensions systems.

At the last count, OTPP had C$117.1 billion in net assets; CPP had C$161.6 billion of which C$26.3 billion was invested in private equities.

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