- 1. Presentation to Toronto Chapter Financial Executive
International Canada Jim Leech Senior Vice President, Private
Capital October 19, 2004 Your First Call
2. Overview
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- Representative transactions
- Overview of Private Capital market in Canada
- What you should know when dealing with Private Capital
providers
3.
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- Teachers in Ontario have had pensions since 1917
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- Run by government ministry
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- OTPP created in 1990 by transferring $17 Billion
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- Government of Ontario and Ontario Teachers Federation
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- Independent Board of Directors
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- Responsible for retirement income of:
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- Assets of $79 Billion (June 30, 2004)
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- Equities 49% including Teachers' Private Capital
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- Inflation Sensitive 30% including real estate
Ontario Teachers Pension Plan Board 4. Teachers' Private Capital
Portfolio Total - $4.4 Billion (plus $1.77 Billion unfunded
commitments) June 30, 2004 $1.50 B $0.28 B $0.52 B $0.67 B $0.61 B
$0.71 B $0.15 B $0.003 B 5. Types of Transactions
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- Primarily Buyouts or Expansion Capital
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- LBO/MBO/MBIs: non-core divisions of large companies
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- Growth capital for private companies, including
acquisitions
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- Add-on acquisitions for existing portfolio companies
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- Private Investment in Public Equities (PIPEs)
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- Strategic block investments
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- Going Private Transactions
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- Undervalued public companies
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- Balance Sheet Recapitalization
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- Good business; Bad balance sheet
6. Components of our Business
- Private Equity(Direct, Funds & Co-Investments)
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- Mid-cap and larger investments - $40M to $500M
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- Exercise control with like minded investors
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- Flexible structuring - $40M to $100M
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- Adjunct to equity investment or structured equity
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- Access to markets we cannot source internally
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- Private equity and mezzanine fund investments - $50M to
$500M
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- Fund and co-investment strategy:Funds - $10M to $50M
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- Co-investments - $3M to $5M
7. Private Equity What do we look for?
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- Invest with like minded partners
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- Real Economy industries with stable or growing cashflows
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- Industry leader with sustained competitive advantage
Alignment of Interests 8. Private Equity Selected Investments 9.
Private EquitySelected Transactions
- Maple Leaf Sports and Entertainment
- LBO: non-core asset of IMASCO in 2000
- Invested $150M in equity as part of $2.6B buyout with KKR
- Taken public in late 2001 (continue as shareholder)
- Public to Private: invested in 1994 buyout of Toronto Maple
Leafs / Maple Leaf Gardens
- Add-on investment to purchase Toronto Raptors and Air Canada
Centre in 1998
- Restructured ownership (58%) in 2003
- MBI: in 2001 invested $45M as part of a group led by Michael
Sifton to buy Hollingers local Ontario newspapers
- Funded prorata share ($27M) of add on acquisition of Canwest
newspapers
- Taken public in 2004 (continue as shareholder)
10. Private EquitySelected Transactions
- LBO: non-core asset of BCE in 2002
- Invested $320M as part of $3B buyout
- Taken public in 2003 (continue as shareholder)
- Public to Private: privatization of large publicly traded
trucking company in 2000
- Committed $60M as part of $540M transaction alongside
management
- MBI: management led buyout of public company division in
1993
- Exited in 2002, after 9 years invested in company
11. Private EquitySelected Transactions
- PIPE to recapitalize: acquired control with Ares and Bain
- Invested US $42.9M in 2003 (subsequently increased to US
$48M)
- LBO: acquired non core asset of three airlines in 2003. Co-led
with CVC
- Invested US $137.7M as part of $1.1B buyout
- Recapitalization: Structured, underwrote and syndicated new
capital structure ($610M)
- Retained $350M of mezzanine debt
- Fixed Income retained $180M of senior debt
12. Venture Capital What we look for?
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- Fund and co-investment strategy (only invest with Fund
Partners)
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- Fund investments range from $10M to $50M
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- Targeted to telecom, information technology, biotech
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- Initial co-investment $3M to $5M up to $20M over life of
investment
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- Demonstrated history of above average returns over long
term
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- Operational and financial expertise
13. Venture Capital Selected Investments Cambrian 14. Venture
Capital Selected Transactions
- Initial investment made in 1997 alongside Newbridge
Networks
- Invested $1.4 million over several rounds of financing
- Company acquired by Newbridge Networks in 1999
- Initial investment of $2.1 million made in 1998 alongside
Celtic House
- Company acquired by Nortel Networks in 1998
- Initial investment made in 1998 alongside Celtic House
- Invested $6.3 million over several rounds of financing
- Company acquired by Quest Software in 2000
- Initial investment made in 1999 alongside Woodside Fund
- Invested $10.8 million over several rounds of financing
- Company acquired by Conexant in 2000
- Invested $0.5 million in 1999 alongside Celtic House &
Kodiak Venture Partners
- Company was acquired by PMC Sierra in 2000
15. Venture Capital Selected Transactions
- Invested $1.6 million in 2001 alongside Alta Biopharma
Partners
- Signed large partnership with Pfizer in 2002 and taken public
in 2004 (continue to hold shares)
- Invested $4.8 million in 2002 in a PIPE transaction alongside
Sanderling Ventures
- Sold significant portion of shares
- Invested $2.7 million in 2002 alongside Accel Partners (other
investors include Redpoint Ventures, Meritech Capital Partners and
Advent International)
- Signed reseller agreement with IBM in 2004
- Invested $7.1 million in 2002 alongside Accel Partners
- Other investors include Benchmark Capital and CrossPoint
Venture Partners
- Invested $3.5 million in 2003
- Other investors include Kleiner Perkins Caufield & Byers,
Benchmark Capital, Accel Partners and Sutter Hill
16. Teachers' Private CapitalUnderstanding Our Business Maximize
Operating Value Exit VALUE CAPTURE(6+ months) VALUE CREATION(5+
years) Due Diligence &Negotiation Acquire IdentifyOpportunities
Structure
17. Teachers' Private Capital Summary
- Large pool of capital (initial and follow on investments)
- Long-term investment horizon
- Independent (no secondary agenda)
- Not operators, supportive of management teams
- Successful track record (over 25% return since inception )
18. Canadian Private Capital Market Total Capital Under
Managementby Private Capital Market Segment; 2003 Total Amount
$48.6 Billion 2004Macdonald & Associates Limited.All rights
reserved. 19. Private Equity in Canada Private Equity Capital
Invested 2004Macdonald & Associates Limited.All rights
reserved. 20. Private Equity in Canada Continued * Excludes
Teachers Private Capital % Years 2.9 10.7 10.4 16.4 2004Macdonald
& Associates Limited.All rights reserved. 21. Private Equity in
Canada Continued Private Equity Players Caisse TD Capital Callisto
TeachersEdgestone Torquest > $50 Million $25 50 Million < $25
Million Schroders CAI 13 US Firms OMERS/Borealis Kilmer Onex Scotia
Capital (?) Clairvest 22. Mezzanine Financing in Canada Mezzanine
Capital Invested 2004Macdonald & Associates Limited.All rights
reserved.
23. Venture Capital in Canada $2.7B 815 $5.8B 1006 $3.7B 743
$2.5B 681 $1.5B 616 $0.8B 379 2004Macdonald & Associates
Limited.All rights reserved. 24. Venture Capital in Canada
Continued * Excludes Teachers Private Capital Years Investment
Returns forVenture Capital June 30, 2004 2004Macdonald &
Associates Limited.All rights reserved. 4.3 1.8 -10.3 -1.2 % 9.5 5
3 1 25. Venture Capital in Canada Continued
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- Contrast to US Venture Capital
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- Not as badly hit in Internet / Telecom
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- No experienced practitioners
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- Need to build new Canadian industry
26.
- Institutions have Alternatives
- Cannot build an industry on tax incented money
- Poorly conceived legislation E.g. business income trusts,
QLP
Private Capital in Canada 27.
- Understand return objectives
- Largely staffed by financial engineers
- Hate surprises / sudden changes in direction
What You Should Knowin Dealing with Private Capital 28.
Questions 29. Teachers' Private Capital It all starts with a call
So make us your First Call. (416) 730-5359 [email_address]