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August 30, 2021
 
 
 
 
Inside the deal: AIMCo’s acquisition of Howard Energy Partners, Canadian PE & VC investing dips further in Q3, WorkJam lands $50m in Series D round
 
 
 
 
Happy Monday!

Inside the deal: Alberta Investment Management Corp earlier this month announced its acquisition of Astatine Investment Partners’ stake in Howard Energy Partners, a San Antonio, Texas-based provider of midstream energy solutions. Acquiring an initial 28% stake in HEP in 2017, AIMCo through the deal increased its ownership interest to 87%.

This week, PE Hub’s Obey Martin Manayiti interviewed Ben Hawkins, AIMCo's head of infrastructure, renewables and sustainable investing, about the purchase. A key theme, Manayiti noted, was the Canadian pension system’s interest in maintaining a portfolio of hydrocarbons that are key for establishing profitability and energy supply, while at the same time making bets on new forms of renewable energy.

HEP owns and operates natural gas and crude oil pipelines, natural gas processing plants, refined products storage terminals, deep-water dock and rail and fractionation facilities. It also has a renewables profile through hydrogen production and renewable diesel logistics facilities. HEP operates in Texas, New Mexico, Oklahoma, Pennsylvania and Mexico.

Some technologies and innovations are still developing on the renewable energy side, bringing a cloud of uncertainty as to the scale at which they will become dominant, Hawkins told Manayiti.

“The renewable area is less certain and maybe the ability to scale up is less certain,” he said. “We try to make multiple strategic bets and be in a position for growth, depending on which of those strategic bets end up being the right ones.”

By being involved in some of these renewable projects, Hawkins said AIMCo is creating “options for that scale of factor if some of the uncertainties that are currently in the market get resolved.” The Biden Administration’s recently passed Inflation Reduction Act is also setting the stage for the development of more renewables.

AIMCo's HEP deal comes at a time the world is grappling with tight energy supplies, due in part because of Russia’s war in Ukraine that has sent prices of traditional energy skyrocketing, creating a major opportunity for investors in the space.

“The existing core business is paying the bills today, and it’s the bulk of our investment thesis right now, but we are also trying to think about the long run and things like renewable diesel would end up being part of that long run element of the thesis,” Hawkins said.

The decision to become majority investor was based on the opportunity to create value for HEP in a manner that needed supportive capital and “parties like us,” Hawkins said. He also described HEP as well-suited to be a major player in energy transition based on its ability to leverage its existing core business, relationships, existing assets, technical know-how, among other things.

AIMCo is also looking to capitalize on natural gas, which is having strong macro tailwinds given the strong demand for LNG, Manayiti wrote. Many investors and industry players see natural gas as a key transition fuel that can displace less clean fuels, such as coal-fired generators, and can be a backup plan when renewables fail to produce due to erratic weather conditions. Subscribers can read PE Hub’s’ story here.

Slowing deal market: Thanks to continuing economic uncertainty and volatility, fuelled by inflationary pressures, rising rates and geopolitical factors – never mind fears of a recession in 2023 – dealmaking almost everywhere continued to decline in the third quarter.

This includes Canada's venture capital market, where 144 financings raised C$896 million between July and September, down 50 percent from the second quarter, according to a report by the Canadian Venture Capital and Private Equity Association.

This brings VC investing back to pre-pandemic levels, CVCA said. The trend line was largely the same in Canada’s private equity market, where 199 deals captured $2.4 billion in Q3 2022, down 11% from three months earlier. At the end of September, VC invested in Canada stood at $7.2 billion, while PE invested totalled $6.5 billion. Download CVCA’s Q3 2022 PE & VC reports here.

Canadian VC deal of the week: That would be Montreal-based WorkJam, a frontline workforce app that helps retail, hospitality and manufacturing businesses engage, upskill and retain talent. WorkJam this week announced raising $50 million in Series D financing led by new investor Fonds de solidarité FTQ and returning investor Inovia Capital. Blumberg Capital and Demopolis Equity Partners also backed the round.

“Enterprise businesses across retail, hospitality, manufacturing and other industries are still dealing with turbulence within the workforce and the ripple effects of the Great Resignation,” WorkJam CEO Steven Kramer said in a statement. The funds raised will be used to expand the company’s reach in Europe, Southeast Asia, Latin America and the US, fuel product innovation, and accelerate growth. See Venture Capital Journal’s news brief here.

Canadian PE deal of the week: Dentalcorp, a Toronto-based network of dental practices, this week announced that its board of directors has formed a special committee to review and evaluate strategic alternatives that may be available “to unlock shareholder value.” The decision was made partly “in response to unsolicited expressions of interest that have been received,” CEO and chairman Graham Rosenberg said in a statement.

The news is big because Dentalcorp only last year closed an IPO of subordinate voting shares on the Toronto Stock Exchange, bringing in $950 million (including the proceeds of a private placement). Those with a vested interest in any exploration of options and offers include the company’s post-IPO PE shareholders: L Catterton, Imperial Capital Group and OPTrust. Check out PE Hub’s news brief here.

 
 
 
Top Scoops
 
Spotting opportunities: OMERS Private Equity is set to deploy capital in minority transactions alongside control deals in 2023, following one of its busiest years in Europe. That’s according to a story this week by Private Equity International’s Carmela Mendoza, based on an interview with Jonathan Mussellwhite, OMERS’ head of European private equity.

“The market is challenging,” Mussellwhite told Mendoza. “While our focus is on control position investments, we’re thinking very much where the opportunities for us are to step in and be a supportive minority partner.”

What this means is the investor can provide a range of capital solutions in a fiercely competitive PE landscape. “We can do control position investments, we can do minority investments, we can do preferred investments,” he said. “We have the ability, both culturally and with the strength of our capital, to be a really strong partner for businesses or for other private equity firms who are looking for capital over the coming period.” Subscribers can read Private Equity International’s story here.

Call to action: The Net Zero Asset Owners Alliance, a global US$11 trillion coalition of institutional investors – including some big Canadian institutions like Caisse de dépôt et placement du Québec – this week released a “call to action” to private-market managers. It’s a document that should cut through the climate noise, New Private Markets’ Toby Mitchenall wrote.

Put simply, he wrote, these institutional investors are telling private-market managers exactly what they need when it comes to both reporting and “direction of travel” on climate action.

The document gives expectations on timelines for emissions reporting (starting next year) and for making net-zero commitments. It gives disclosure expectations (based around the Taskforce on Climate-related Financial Disclosures framework) and details how firms should be approaching fossil fuel-related investments. It also gives asset class-specific expectations. Subscribers can read New Private Market’s story here.

That’s it. Have a great day! Please get in touch with me with your feedback, story ideas, tips, etc., at kfalconer@buyoutsinsider.com or find me on LinkedIn .
 
 
 
 
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