Healthcare M&A Case Study

Overview

• BC Housing, Manitoba Housing, and Social Housing Services Corporation (Ontario), as part of Housing Partnership Canada recognized the lack of access to efficient financing in the affordable housing sector and wanted to investigate the possibility of creating a housing finance entity which would aggregate capital needs of the sector and access the capital markets on their behalf

MPA’s Role and Key Considerations

• MPA was first engaged to conduct a market study and report of the affordable housing sector in Canada and the feasibility of creating a brand-new affordable housing finance entity that would aggregate the capital needs of affordable housing developers all over Canada and access the debt capital markets to serve those capital needs
• This culminated in various subsequent mandates:
  • Engaged to assist with the creation of all aspects of affordable housing finance entity 
  • Engaged to assist with obtaining a credit rating to access the Canadian debt market 
  • Engaged for the execution of the company’s capital market strategy of a $33M IPO
• Across these mandates, MPA conducted several financial analyses, prepared key documents such as a business case, assessed the appropriate credit rating, provided guidance throughout the Request for Proposal process, assisted in determining issue pricing, and negotiated both the underwriting engagement letter and the S&P engagement

Outcome

• HIC’s initial offering of long-term fixed rate capital markets debt is supporting a number of very important affordable housing projects in different locations of Canada
• It is expected that this platform will be used for years to come delivering efficient financing to developers of affordable housing across Canada

Overview

• Zest Communities (“Zest”) owns The Village at St. Elizabeth Mills, the only large-scale seniors’-oriented community in Canada
• Zest developed a 10-year plan for the community and tried for several years to implement this plan and refinance the asset in order to unlock the significant development value (~ 1.5M buildable ft² of new development opportunity), but the company’s complicated corporate structure impeded the process
• Several institutional lenders and capital groups had attempted to underwrite the opportunity without success

MPA’s Role and Key Considerations

• MPA was engaged as an Advisor to assess how best to reorganize the company’s capital and legal structure and refinance its primary asset. Zest’s capital structure at that time prevented the company from developing its land assets
• Zest ultimately decided to proceed with MPA’s restructuring recommendations, and this culminated in subsequent mandates:
  • Engaged to restructure the company
  • Engaged to assist with segregating three business divisions into separate entities
  • Engaged to assist in arranging $75 million in strategic debt to finance its business divisions

Outcome

• The nature of the company’s legal and financial structure necessitated a non-traditional capital structure and plan which included converting from declining balance life leases to market equity life leases 
• Successful restructuring unlocked over $75 million in additional value for Zest Communities and allowed them to execute their master development plan

Overview

• Mobilicity (formerly DAVE Wireless) was a new wireless entrant resulting from the CRTC 2008 spectrum auction
• Service was launched in 2010, but Mobilicity faced strong competition from the incumbent wireless operators and financial headwinds in funding the network build-out
• Consequently, Mobilicity pursued several sales attempts over the years, one of which was to Telus
• The proposed Telus transaction was approved by the Mobilicity Board and stakeholders, but it was prohibited by the Competition Bureau

MPA ‘s Role

• Morrison Park was retained by the special committee of Mobilicity to provide a fairness opinion under a CBCA plan of arrangement during a sale attempt to Telus

Outcome

• The proposed Telus transaction was approved by the Mobilicity Board and stakeholders, but it was prohibited by the Competition Bureau
• Mobilcity was ultimately acquired by Rogers out of bankruptcy in a $440M offer that included concessions to the CRTC and Industry Canada for the sale of spectrum to Wind Mobile

Testimonial

“The MPA team did a great job, and we are delighted with the result. MPA’s dedication, guidance, and advice to Pro Form proved invaluable from the beginning of the sales process to its conclusion. Their reach, expertise, and understanding of our business enabled them to market our company to the buyer community, develop and execute a successful sales strategy, lead the negotiation process, and effectively guide us through due diligence and documentation to a successful close.”

– Jim Speck, CEO of Pro Form Products

Overview

• MPA acted as exclusive financial advisor to Pro Form Products on its sale to Transtar Autobody Technologies, a portfolio company of Blue Point Capital Partners
• Pro Form Products provides refinishing and repair products for automotive, aviation, industrial and marine applications

MPA’s Role and Key Considerations for the Pro Form

• Pro Form Pro Form Products engaged MPA to act as the advisor on its intended sale
• MPA’s deal team put together comprehensive marketing documents and identified numerous potential buyers for the business
• The deal team held numerous discussions with counterparties, surfacing the best offers and eventually executing on a thorough and expeditious due diligence process with Transtar and BPCP

MPA’s Expertise benefited Pro Form

• MPA’s broad network into the national and international automotive aftermarket facilitated surfacing the right buyer for Pro Form
• Due to MPA’s deal expertise, the transaction could be closed expeditiously after entering into s short exclusivity period

Testimonial

“We interviewed 3 potential advisors before selecting MPA. Once negotiations began, MPA’s experience and expertise came through as their suggested strategies and tactics lead to a great result.”

– D. Brunner, President, Milton Manufacturing Inc

Overview

• The owners of Milton Manufacturing Inc. (MMI) engaged MPA to identify strategic alternatives to sell the company 
• MMI was a market leading niche manufacturer of custom cartridge air filters in Southern Ontario
• The company was owner-operated with strong and consistent historical financial performance, attractive margins and cash flow, and growth opportunities

MPA’s Process

• Consideration of a sale was a highly sensitive subject for the company’s operations. As such, MPA conducted a sales process that would maintain confidentiality and strict control of information
• Performed extensive valuation analysis to guide the client during offers and negotiations
  • Highlighted the drivers of value specific to the client
• Identified a targeted subset of potential acquirers across strategics, family offices, search funds and private equity investors
• Prepared thorough marketing and due diligence materials for both domestic and international investors.  MPA leveraged its IMAP ¹ partners around the world to identify international prospects
• Developed and implemented an effective post-closing transition agreement ensuring a seamless transfer. Outlined processes for: production and scheduling, equipment and maintenance,  sales, office procedures, accounting, and IT
• Worked extensively with legal counsel to ensure that terms initially proposed by the buyer survived in the definitive agreement 

Outcome

• Milton manufacturing was acquired by PleatcoPure, a US private equity backed strategic, for above the company’s target price

Overview

• Bell Aliant was a prominent, publicly traded, telecommunications service provider that primarily operated in Atlantic Canada
• BCE was a significant shareholder owning 44% of Bell Aliant pre-transaction
• Bell Aliant and BCE attempted to reach an agreement, which would have resulted in BCE acquiring the remaining outstanding shares of the firm – however this deal never materialized
• MPA Principals were approached by the board of Bell Aliant to re-engage on a potential transaction with BCE.

MPA‘s  Advisor Role

• Acted as independent financial advisors to Bell Aliant’s board of directors
• MPA Principals diligently reviewed company and market information through a post-acquisition lens to uncover the appropriate value of the transaction
• Drew upon experience to play an active role in party negotiations and navigate the deal to a close

Outcome

• Consistent with the recommendation from MPA Principals, the C$4 Billion offer consisting of a mixture of cash and stock consideration was accepted
• The deal indicated a 12% premium over Bell Aliant’s stock price at the time of the offer
• The deal proved to be accretive for both sides with BCE’s stock advancing 18% in the six months following the transaction closing

Testimonial

“They were a quick study on our business. They understood our strategic objectives, they understood how deals like this get done and they worked hard on our behalf to achieve our objectives.”

John Visser, Vice President, Client Development Major Shareholder

Overview

• OpenVenue was Canada’s largest online market research firm
• Majority owned by two local entrepreneurs
• Received an offer for their business for $22.5 million

MPA’s Role

• OpenVenue did not want to be seen by the market as “selling the company” due to the potential adverse effects on the business and customer relationships
• The nature of the business was such that potential acquirers would not respond well to a  “cookie-cutter” auction process
• Based on the nature of the transaction, and MPA’s relationship with the client,  the entire process required a highly tailored approach:
  • Managed prolonged negotiations with Research Now (buyer)
  • Managed prolonged due diligence process and extensive participation in negotiation of purchase and sale agreement
  • Financial advisory on detailed matters such as working capital, leasehold improvements and tax

Outcomes

• MPA executed a highly effective sales process which resulted in a transaction value of $47.5 and complex elements:
  • A 2-year earn out provision which provides for significant future value and ensures ongoing participation in the combined entity
  • A detailed plan dealing with clients, prospects and operational matters
  • Mixture of cash and share consideration

Testimonial

“Brent Walker, Bill Gula and their team at MPA were critical advisors to the committee representing the largest stakeholder group of Kitchener-Waterloo based Economical Insurance Company in the demutualization process, the non-mutual policy holders. This stakeholder group represented about 80% of the value of Economical. The regulations for demutualization were established by OSFI and Economical was the first P&C company to go through this OSFI mandated process. The process was highly regulated, complex and took over a year to complete. 

The demutualization process has now been approved. One of the unique outcomes of the transaction was the establishment of the Economical Insurance Heritage Foundation, a new mission driven foundation dedicated to enhancing sustainability and minimizing systemic risks in the economy. Our stakeholder group took the lead in the formation of this foundation.

MPA were instrumental in every step of the negotiation process that created this important result for Economical, its stakeholders and this new foundation.”

– George Fowlie, Non-Mutual Policyholder Committee

Overview

• Economical Insurance’s Board of Directors announced the initiation of the company’s demutualization process
• This mandate involved significant interactions with OSFI
• The company was undergoing the latter phases of its demutualization process including the voting process of a) eligible mutual policy holders and b) all eligible policyholders, after which Economical could apply for demutualization to the Minister of Finance

MPA’s Role and Relevant Factors

• Strength of IPO and equity capital markets, the future profitability of the Property & Casualty insurance market and the company’s future outlook
• Various financial analyses with respect to the value of benefits in the demutualization including IPO analysis, fully distributed trading value analysis and takeout value analysis
• Dual-voting and multiple-voting class corporate stock reorganizations in Canadian corporations (including Life Insurance companies) in assessing the value of voting and governance right

Outcome

• MPA served as financial advisor to the Non-Mutual Policyholders of Economical Insurance on its negotiation of benefits allocation
• Allocation of financial benefits among classes of stakeholders in accordance with the rights of those stakeholders

Overview

• McGraw-Hill Ryerson (“MHR”) had received an indicative confidential proposal to acquire the shares not already held by its parent company, McGraw-Hill Education (“Parent”) 
• Transaction subject to the minority approval requirements under Multilateral Instrument 61-101 (“MI 61-101”)

Key Considerations

• Parent held approximately 70% of MHR and indicated to MHR that it was not selling its interest in MHR and accordingly no market canvass for alternative buyers were undertaken
• Other significant shareholder who owned approximately 12.5% in MHR executed Support Agreement with Parent
• Management’s Strategic Initiatives
• Limited liquidity

MPA’s Role and Relevant Factors

• Written formal valuation pursuant to the requirements of MI 61-101
• Financial advisory and Fairness opinion of the consideration

Outcome

• MPA concluded that the proposed transaction was financially fair from the perspective of MHR’s shareholders

Overview

• Millar Western, a private Canadian forest products company looked to restructure their debt obligations – US$210 million of 8.5% senior unsecured notes (“Existing Notes”)
• Initial issuance to hedge against $US denominated commodity pricing – unsuccessful
• Company realized its ability to services the notes were compromised; no access to capital markets; not able to wait for Countervail and Anti-Dumping Recovery 
• The transaction immediately brought Millar Western’s capital structure in-line with its peers, and improve its capital structure relative to various outcomes that could have been reasonably expected
• Reduced Millar Western’s indebtedness by approximately US$97 million and annual cash interest expense by more than US$7 million and provided an extended maturity date for the newly issued notes

MPA ‘s Role

• MPA was engaged to provide a fairness opinion to the company
• An opinion as to whether the Noteholders receiving new secured notes under the arrangement would be in a better position than if the company were liquidated

Key Considerations

• Uncertainty of Countervail and Anti-Dumping recoveries and other industry specific concerns
• Availability of strategic alternatives

Overview

• Canadian Press (“CP”) was a cooperative with subscribing newspaper members located across Canada. Given their structure, CP lacked balance sheet strength and like many companies at the time, developed a significant pension plan deficit (defined benefits plan).

MPA’s Role & Key Considerations

• Complex stakeholder situation involving multiple interested parties and regulatory issues
• Regulatory approval by OSFI was required due to the pension obligations underlying the transaction
• Morrison Park was retained as a lead financial advisor to assess Canadian Press’ position design a potential transaction structure, execute the transaction and provide a fairness opinion to the Board of Directors

Outcome

• Ultimately, a group of three large newspapers (TorStar, Globe & Mail, and La Presse) acquired CP in exchange for supporting the business and pension plan obligations of the existing members. The terms of the agreement included:
  • OSFI approved a pension fund relief package extending out the annual deficit true-up contributions
  • Existing members entered into a commercial agreement for continued access to content