Canadian Private Equity Partners (CPEP), which a short time ago raised the largest private equity fund in Canadian history, recently entered as a white knight into a bidding war against another Canadian company, Unity Capital Inc. for Canadian holding company Harrowston Inc. CPEP has subsequently won, and is taking Harrowston private and rolling its companies into its portfolio.
CPEP is one of the five investment arms of TD Capital, the private equity division of TD Securities. CPEP is focused on a wide range of sectors in the Canadian marketplace.
In total, CPEP acquired 96% of Harrowston shares.
“Our strategy was to acquire Harrowston’s underlying businesses,” said Joe Wiley, managing director of CPEP.
Evidently, Harrowston has been in the market in Canada since the early ’90s. They were a middle-market private equity shop that was publicly traded. But because of their legal structure they were getting punished in the public markets. Analysts had taken their stock price down, and they were trading at less than the cash on their balance sheet ($135 million).
“Their portfolio fits nicely with ours,” Wiley said. “Especially as they had a 44% interest in Marsulex, an environmental services company (for the mining and oil industries).”
Riley said Marsulex has a new technology that will allow for the burning of dirtier coal. It removes the sulfur byproduct much more efficiently than technology being used today, which is important because legal smokestack emissions of sulfur are 4% and the U.S. generates half of all its electricity through coal burning.
“Populations will have to burn dirtier coal as clean coal runs out,” said Riley. “Marsulex has a patented technology that allows power generators to burn at 8-to-10% because the technology removes the sulfur byproduct much more efficiently. This will reduce costs, and allow for the use of cheaper coal.”
Along with Marsulex, Harrowston’s operations included Anchor Lamina, a major manufacturer and supplier of die sets, mould bases and related accessories in North America and Europe; Conexus Media Inc., a North American media company that owns a 50% interest in Key Media Ltd., publisher of Toronto Life, Where, WEDDINGBELLS, Fashion and Fashion File TV; and MLL Telecom Ltd., an established U.K.-based telecommunications company.
TD Capital’s CPEP Fund was formed in 2000 to make private equity and equity-related investments in Canadian-based, middle-market companies.
The CPEP Fund has invested and committed capital totaling $635 million.
Riley called the acquisition of Harrowston, “an example of the kinds of investments CPEP makes: Canadian-based private equity and equity-related investments in middle-market companies in any sector.”