Ontario Teachers’ Pension Plan head office in TorontoSami Siva
The Ontario Teachers' Pension Plan says acquiring a majority stake in the world's largest specialty manufacturer of aluminum containers adds an "attractive niche" market to its string of recent investments.
Teachers' Private Capital, the fund's investment arm, led an investment group in taking over Ohio-based Exal Corp. for an undisclosed price in a deal announced Monday. The group also includes Stonebridge Partners, a U.S.-based private equity firm that focuses on the specialty manufacturing sector.
Exal manufactures aluminum containers for consumer products ranging from beverages to hairspray.
Erol Uzumeri, senior vice-president of Teachers' Private Capital, said it had been in talks to acquire the container company for about a year after the fund identified it as a "unique opportunity."
"We try and find proprietary transactions where nobody else knows about them so they're not auction situations; they're situations where we're having a one-on-one dialogue with the seller," he said.
"Those types of transactions take, frankly, a long time to find, but when you find them they're really the ideal situation," he said. "... This is one of those situations where the industry fundamentals are great ... there's growth opportunities in emerging markets."
Mr. Uzumeri said Teachers' is the majority stakeholder in the company, but would not provide further details.
Exal was founded in the United States by Delfin Gibert, its current president and chief executive officer, in 1993 and has grown to six plants and 47 manufacturing product lines in the U.S., Europe and Argentina.
It produces about 1.3 billion units a year, primarily for multinational consumer packaging customers in the household products, personal care and beverage industries and generates annual revenue of $400-million (U.S.).
Mr. Uzumeri said the deal leaves it in an opportune position to invest in acquisitions and consolidation within the consumer container industry.
"There's a lot of consumer products companies and beverage companies that are really just starting to explore the use of aluminum in their packaging...we're just really scratching the surface in terms of the opportunity at this stage."
Teachers handles the pension funds and administers the pensions of Ontario's 289,000 active and retired teachers.
With $87.4-billion (Canadian) in net assets at the end of last year, the pension fund is the largest single-profession pension plan in Canada and one of the world's largest private equity investors.
Teachers has been bulking up its portfolio in diversified sectors in the recent months. Last month, Teachers signed a deal to acquire Camelot Group PLC, which holds an exclusive licence to operate the U.K. National Lottery, for an estimated £389-million ($590-million).
In January it led an investor group that bought American International Group Inc.'s Canadian mortgage insurance business, United Guaranty Mortgage Insurance Co.
In December, the pension fund increased its ownership in Bristol International airport, Britain's ninth largest, to 49 per cent, and in September announced its decision to buy a major stake in Simmons Co., the troubled U.S. mattress manufacturer.
Mr. Uzumeri said the string of recent transactions is "more coincidence than anything else," adding that he doesn't expect the pace of activity over the past four months to continue.
"We started with a change of strategy about two and a half years ago to really focus on these industry groups and sectors and to really have deep expertise within that and so it's really ultimately the payoff of the execution of that strategy," he said.
Teachers had a $2.5-billion shortfall at the end of fiscal 2008. Another $19.5-billion in losses has been held back through what is known as a "smoothing adjustment" and will be recognized over the next four years.
The fund is set to release its 2009 annual financial statements Tuesday.
Canada's pension fund giants - including the Caisse de dépôt et placement du Québec, Teachers, Ontario Municipal Employees Retirement System and the Canada Pension Plan Investment Board - have all been trying to diversify their investments in an attempt to seek stable returns to pay future retirement benefits to plan members.
Many of the pension funds have invested heavily in infrastructure such as airports, power plants and ports around the world.