September 9, 2013 7:48 pm
Pension plans: Flying solo
Canada’s public retirement funds are moving into dealmaking and taking on more risk
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This year, Omers decided to make a move again. The pension plan, which manages C$60bn ($58bn) of assets for Ontario’s firefighters and other municipal workers, discreetly approached Vue’s private equity owner with a knockout £935m offer and a condition: that no competing bid be considered. Another Canadian pension fund, Alberta Investment Management, backed Omers’ offer and the sale was agreed – without giving BC Partners a chance to compete.A year later, Omers joined forces with BC Partners to make an offer for Odeon, the UK’s biggest cinema chain. This failed, too, after Odeon’s private equity owner Terra Firma held out for a higher price.
n October 2010, London-based private equity group BC Partners found itself in a bidding war over Vue, the UK’s second-largest cinema operator. Its rivals included an assortment of buyout firms but one of the bidders stood out: a Canadian pension fund.
In the end, neither BC Partners nor the Ontario Municipal Employees Retirement System (Omers) won the auction. But the bid whetted the Canadians’ appetite.
This year, Omers decided to make a move again. The pension plan, which manages C$60bn ($58bn) of assets for Ontario’s firefighters and other municipal workers, discreetly approached Vue’s private equity owner with a knockout £935m offer and a condition: that no competing bid be considered. Another Canadian pension fund, Alberta Investment Management, backed Omers’ offer and the sale was agreed – without giving BC Partners a chance to compete.A year later, Omers joined forces with BC Partners to make an offer for Odeon, the UK’s biggest cinema chain. This failed, too, after Odeon’s private equity owner Terra Firma held out for a higher price.
Canada’s pension funds have been moving aggressively into dealmaking and other businesses that they used to outsource to private equity firms and hedge funds. After years of record low interest rates that have dented their returns, the Canadians are seeking to cut back on the fees they pay to these companies. They also want to invest as equal partners with buyout funds, as in this week’s $6bn takeover of US luxury retailer Neiman Marcus by the Canada Pension Plan Investment Board and private equity group Ares.
Some pension funds are beefing up their internal investment teams to find deals on their own. And when they find a deal, some, such as Omers, are tempted to pursue it without a buyout firm as a partner.
Other pension plans and sovereign wealth funds – including GIC of Singapore and Abu Dhabi’s wealth fund – are beginning to follow the Canadians’ lead, posing a threat to the lucrative model that private equity groups such as New York-based KKR or London-based BC have enjoyed for the past two decades.
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This BLOG looks at pensions and their impact on what are called Public Private Partnerships or P3’s these are not really about private funding at all but about two streams of public funding, pensions and government with private capital a third partner.
We will also deal with other pension matters, such as Defined Contribution Plans (DC) vs Defined Benefit (DB) PLANS, the weakness in private plans, the need for pension reform in public pensions to have shareholder rights, directorships and ethical investment directives and policies.
Finally taking the long view we will show how these funds are forms of evolving social capital that is dominating private capital as we evolve into socialization of capital.
Click HERE to read more....
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