Ontario’s municipal workers’ pension fund has sold a majority stake in global marine services company V.Group to buyout firm Advent International in the first sale by the Canadian fund’s private equity arm in Europe.
Pension funds and other institutional investors are a growing force in direct private investment as they seek to bypass investing in traditional buyout funds and boost returns against a backdrop of low global interest rates.
As part of the shift to more direct investment, the Ontario Municipal Employees Retirement System (OMERS) set up a private equity team (OPE) and now has about $10 billion invested.
It started a London operation in 2009 and two years later it bought V.Group, which manages more than 1,000 vessels and employs more than 3,000 people, from Exponent Private Equity for an enterprise value of US$520 million.
Mark Redman, global head of private equity at OMERS Private Markets, said the V.Group sale was its fourth successful exit worldwide this year and vindicated the fund’s strategy. He said no more private equity sales were in the works for now.
“I am delighted that we have demonstrated ultimate proof of concept with this exit and am confident the global team shall continue to generate the long-term, stable returns necessary to meet the OMERS pension promise,” he said.
OMERS, which has about $80 billion (US$60 billion) of assets under management, still allocates some $2 billion through private equity funds, but OPE expects this to decline further as it focuses more on direct investments.
OPE declined to disclose how much Advent paid for 51 percent of V.Group. OPE will remain a minority investor.
OPE targets investments in companies with enterprise values of US$200 million to US$1.5 billion with a geographical focus on Canada, the United States and Europe, with a particular emphasis on the United Kingdom.
As pension funds increasingly focus on direct private investments, traditional private equity houses are in turn setting up funds which hold onto companies for longer and target potentially lower returns.
Bankers say this broad trend in the private equity industry has led to higher valuations as the fundraising pool has grown bigger than ever.
Advent has a US$13 billion fund for equity investments outside Latin America of between US$100 million and US$1 billion.
The sale announced on Monday followed bolt-on acquisitions of Bibby Ship Management and Selandia Ship Management Group by V.Group.
Goldman Sachs acted as financial advisers to the shipping services company; Weil acted as legal counsel and EY as financial diligence advisers.
By Dasha Afanasieva
(Editing by David Clarke)
Photo courtesy of V.Group