The impact of the global financial crisis seems a distant memory with B.C. returning to near-record corporate finance activity in 2010.
The value of the top-50 mergers and acquisitions last year totalled $29.1 billion, a 53% increase from the $19 billion transacted in 2009.
The total volume of the top 50 M&A deals was the fourth largest in at least the past 14 years after the peak of $40 billion reached in 2006, according to BIV research.
More than two-thirds of last year’s biggest M&A deals were in B.C.’s mining sector, including last year’s largest deal: Kinross Gold’s acquisition of Red Back Mining for $7.3 billion that closed last September.
This continues the historical trend of mining taking top spot on BIV’s biggest deals lists. Over the past decade, mining deals have been among the province’s biggest, with Teck Cominco’s $14.1 billion acquisition of Fording Canadian Coal Trust in 2008 being the largest, topping Barrick Gold’s $12 billion acquisition of Placer Dome in 2006.
In terms of the number of M&A deals, Goldcorp Inc. (TSX:G) was among the most active, involved in nearly $5.4 billion worth of the top 50 deals, from its $3.5 billion acquisition of Australia’s Andean Resources Inc. that closed in December, to its $308.5 million acquisition of Canplats Resources in February 2010.
Growing interest by Chinese companies in B.C.’s mining sector contributed almost $2.1 billion worth of M&A deals last year, the largest being China Gold International’s $764.2 million acquisition of Skyland Mining Ltd., which was the ninth largest M&A deal on this year’s list.
The four deals among the top 50 involving China is a notable shift toward majority ownership, compared to the minority investments made in 2009, where China’s sovereign wealth fund, China Investment Corp. invested $1.7 billion into Teck Resources Ltd. (TSX:TCK.B), and US$500 million into SouthGobi Resources (TSX:SGQ).
Many of last year’s deals were transformative, especially those outside the mining sector. Macdonald, Dettwiler and Associates Ltd.’s (TSX:MDA) sale of its U.K. and U.S. property information business for $875.4 million closed a significant chapter for the Richmond-based high-tech company and returns the company to its space-based roots.
Over the past decade, MDA focused on growing its property information division, making several acquisitions in the U.S. and Europe (See “Real estate: the final frontier” – issue 873; July 18-24, 2006). Over the past few years, revenue from the division had eventually surpassed those from its space-related information systems division.
By 2008, the company was even looking to divest itself from its space-related business until the $1.3 billion deal with U.S.-based Alliant Techsystems Inc. was blocked by then industry minister Jim Prentice.
Versacold’s sale of its non-Canadian assets to Americold also marks a significant shift in strategy for the company that had grown to become one of the largest cold-storage companies in the world. Versacold has consistently been involved on several large M&A deals over the years that contributed to its growth, starting with the $1.2 billion acquisition by Eimskip Holdings in 2007.
That purchase led to Eimskip merging Versacold with Atlas Cold Storage, creating a company with 120 cold-storage facilities in North America, Australia, New Zealand and Argentina.
In 2009, ownership of Versacold passed to the Yucaipa Companies, a Los Angeles-based private-equity firm that helped Eimskip restructure after facing insurmountable debt problems during the global financial crisis. Yucaipa owns Americold, and the decision to purchase Versacold’s non-Canadian assets likely related to Yucaipa’s promise to keep Versacold and Americold separate entities. The deal not only led to the transfer of its 54 facilities outside of Canada, but also took Versacold’s CEO Brent Sugden, who became Americold’s president of operations.
Among the other transformative deals made last year were Canaccord Financial’s acquisition of Genuity Capital Markets, and the Churchill Corporation’s acquisition of Seacliff Construction, which merged Dominion Construction, one of B.C.’s largest construction companies, with Calgary-based Stuart Olson.
Persistent strength in the B.C. economy and the equity markets, however, has led to M&A and corporate finance activity continuing strong in 2011.
B.C. continues to draw international interest, with Western Coal Corp. (TSX:WTN) being acquired by Florida-based Walter Energy for $3.3 billion. Local companies are also expanding, with Plutonic Power (TSX:PCC)being acquired by Magma Energy Corp. (TSX:MXY) for $175 million, and Premium Brands (TSX:PBH) continuing its expansion through acquisition in February, after closing five deals in 2010.
With Sun Gro Horticulture being acquired by Calgary-based IKO Enterprises Ltd., and Gold Wheaton being acquired by Franco-Nevada, pent-up demand for M&A deals is likely to drive the market in 2011, barring another major crisis affecting investor and corporate confidence.