BCI's Recent Private Equity Deals

British Columbia Investment Management Corporation (“BCI”) and ATL Partners (“ATL”) recently announced that they have acquired Valence Surface Technologies, the largest independent aerospace surface finishing platform in North America:
Founded in 2013 and based in Houston, the Company provides critical surface treatments such as non-destructive testing, shot peening, chemical processing, plating, painting and spray coating to aerospace and defense components that require complex finishing to meet engineering specifications. Valence currently operates eight (8) facilities throughout the U.S. in key aerospace and defense manufacturing regions, serving over 3,000 customers and processing over 12 million individual parts annually.

“Over the last several years we have built Valence into a market leading platform and we look forward to expanding the Company’s capabilities and geographic footprint as we seek to offer additional, differentiated services to our growing customer base” said Tracy Glende, Chief Executive Officer of Valence. “We are very excited to partner with ATL given their sector focus and in-depth knowledge of commercial aerospace and the surface finishing market.”

“ATL has followed the Valence story since the beginning and we are very impressed with the business that the Valence management team has built,” said Frank Nash, Founder and Managing Partner of ATL. “We believe there are many opportunities for growth in the Company, through both organic initiatives and strategic add-on acquisitions, and we are excited to support the Valence management team as they execute their strategic vision for the Company over the coming years.”

“Valence Surface Technologies is a well-managed leader in the aerospace industry, and BCI looks forward to supporting the business through its next phase of growth,” said Jason Cawley, Senior Portfolio Manager, Private Equity at BCI. “This investment aligns with our clients’ long-term objectives to invest in companies with solid management teams and strong growth potential.”

Owl Rock Capital Corporation and Antares Capital LP provided debt financing to support the acquisition. Lazard served as the lead financial advisor to the Company.

BCI’s acquisition of governance rights in the Company remain subject to customary regulatory approvals.
BCI has had a few deals lately which I didn't cover. This is an interesting one as Valence Surface Technologies is really a leader in a niche market:
  • Valence is a single-supplier solution to aerospace outside processing. With significant investments in capacity, it provides a single supplier full-service solution that improves productivity, lowers lead-times, and allows us to deliver over 25 million parts annually.
  • Valence services every global aerospace market, and all key aerospace and defense programs. With over 3,500 unique approvals, and 700,000 sq. ft. of processing space across 8 facilities, no other supplier can match out breadth and ability to seamlessly service the industry.
  • Valence provides full-service capabilities with a track record of superior service. Even with the most comprehensive set of aerospace approvals and finishing capabilities, it constantly adds new technologies to deliver on key growth programs.
Importantly, Valence's existing management also invested in the company, which ensures alignment of interests.

I also found it interesting that even though financial details weren't made public, one of the funds that provided debt financing for this deal is Antares Capital, a subsidiary of CPPIB (it was the former lending unit of GE Capital and in 2016, CPPIB sold a 16% stake of Antares to Northleaf but remained committed to the private equity lender).

In related deals, BCI posted a press release earlier this month stating BGH Capital (BGH) announced the completion of its acquisition of leading global education provider Navitas Limited (Navitas) in a consortium including some of the largest pension and superannuation funds around the world:
Ben Gray, a Founding Partner of BGH, said it was an exciting time to invest in education and partner with a provider of the calibre of Navitas.

“The market dynamics continue to support Navitas’ growth aspirations, with global demand for education and training remaining strong,” Mr Gray said.

“This is a very significant acquisition for BGH and we look forward to supporting Navitas over the long term.”

Navitas is BGH’s first major acquisition since it was founded in 2017. The acquisition was financed by $1.2 billion of equity from BGH and its consortium partners, and a unitranche debt facility provided by HPS, KKR and Nomura.

BGH’s equity contribution was funded by BGH Capital Fund I which had a final close of approximately A$2.6 billion in May 2018, representing the largest private equity fund focused on Australia and New Zealand.

Navitas entered into a Scheme Implementation Deed with the consortium (BGH BidCo) on 21 March 2019 under which BGH BidCo proposed to acquire 100% of the share capital of Navitas by way of Scheme of Arrangement for a cash consideration of $5.825 per share.

Navitas shareholders voted in favour of the Scheme on 19 June 2019 which was approved by the WA Supreme Court on 21 June 2019. Implementation takes effect today.

Rod Jones, former Navitas CEO of 23 years, said: “I am delighted to be returning to the company I co-founded, as its Non-Executive Chair, and look forward to working with BGH to implement our shared vision which is centred on the best student experiences and outcomes, and strong and trusted relationships with our university partners.”
I guess BCI is part of the consortium which acquired Navitas. What I found interesting in this deal is last year, BGH Capital got rebuffed twice by firms seeking higher offers, and one of those was Navitas:
Healthscope Ltd (HSO.AX) said it had picked Brookfield Capital Partners’ sweetened offer that values the hospital operator at up to A$4.5 billion ($3.24 billion) over BGH’s A$4.1 billion bid.

Navitas Ltd (NVT.AX) also snubbed BGH, saying its A$1.97 billion bid undervalued the adult education provider, but kept the door ajar for a future deal or a rival bidder.

....

Some industry players said BGH could be making a prudent choice by not sweetening its offer.

“The last thing they want to do is increase the price to the level where their clients and investors can’t make a return on their investment capital,” said Simon Mawhinney, chief financial officer at Allan Gray Australia that owns Navitas shares.
BGH, named after ex-Macquarie banker Robin Bishop, and Ben Gray and Simon Harle - who used to lead the Australian team at TPG Capital Management, is a fairly new fund run by experienced professionals. They will realize there's a lot of money out there and when you're competing with the likes of Brookfield, sometimes you need to sweeten your offer or risk losing out on major deals.

Lastly, earlier this month, BMS announced an agreement for a significant investment by affiliates of British Columbia Investment Management Corporation (“BCI”) and Preservation Capital Partners (“PCP”):
The investment, which values BMS at £500m, is subject to regulatory approvals and is expected to close in the third quarter.

The BMS management team, led by chief executive officer Nick Cook, will all remain in their current roles following completion, and management and staff of BMS will remain significant shareholders in the company.

Following the transaction’s completion, Pioneer Underwriters will be owned directly by the current shareholders of Minova Insurance, the holding company that had previously owned BMS.

Nick Cook commented: “The long-term investment by BCI and PCP secures our future as an independent broker and maintains significant employee ownership. We have grown consistently over the past 5 years generating revenues in excess of £100m for the first time in 2018. We look forward to partnering with BCI and PCP as we continue to invest in our business and attract market leading talent to the benefit of our clients. My thanks go to all of our colleagues who have been at the root of our success.”

Dane Douetil, CEO of Minova added: “This investment is excellent news for BMS’s dedicated staff, who will remain important shareholders, and particularly for BMS clients who will continue to benefit from the very best independent advice in the market. It is also a ringing endorsement of the London market and, following considerable consolidation in the broking sector, ensures that an independent voice will continue to be heard.”

Gordon J. Fyfe, CEO/CIO of BCI said: “As an investor of patient capital, we seek companies with a sustainable competitive advantage that offer value-add services and are led by talented management teams. BCI’s long-term investment in BMS allows them to grow the business and generate the returns that our pension plan and accident fund clients require. Our investment also provides regional and sector diversity to our clients’ private equity portfolio.”

Jatender Aujla, a Partner of Preservation Capital commented: “We have been impressed by the growth BMS has experienced since Nick and his management team took over the business. Today, BMS is one of the largest independent specialty lines focused insurance brokers in the London market. We look forward to working with the team as long term partners and helping them seize the significant opportunities available in the market.”
There you go, a whirlwind tour of BCI's most recent private equity deals. I expect BCI will release its fiscal 2019 results very shortly and look forward to covering those results when they're made public.

Below, Valence Surface Technologies is the world's largest independent metal finishing company. It plays a critical supply chain role for the aviation, defense, and space industries.

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