Source: The Canadian Press
The Ontario municipal employees pension fund hopes to cash in on an expected infrastructure spending boom in the United States with a deal to buy an Indiana company that provides utility locating services in 20 states.
OMERS Private Equity said Tuesday that it is acquiring Indianapolis-based United States Infrastructure Corp. from funds affiliated with Kohlberg & Co. L.L.C., a major Wall Street buyout firm.
OMERS, which stands for the Ontario Municipal Employees Retirement System, said the acquisition comes at a time when infrastructure spending — boosted by U.S. government stimulus — is expected to rebound south of the border.
The American company, also known as USIC, provides construction support services for more than 400 telecom, electric, gas, cable and water utilities across the United States. It is called in before construction begins to mark the ground where utility wires, hydro and gas lines are located before crews come in to excavate.
“Construction activity would drive a lot of their business because any time before you dig you’re required by law… to make sure people can find out where the underground infrastructure is,” said Paul Renaud, president and CEO of OMERS Private Equity.
Renaud said the investment horizon in the infrastructure and construction sectors is improving after a year-and-a-half of little construction activity due to the economic slowdown.
“The market has come back… the banks are lending again, you’re starting to see more activity in the private equity space,” he said.
The industry looks attractive because the U.S. government has committed hundreds of billions of dollars to build roads, highways, sewers, bridges and other infrastructure to help create jobs as the U.S. economy recovers slowly from recession.
The U.S. House of Representatives passed a bill in December that contained almost $50 billion in infrastructure funding.
The Canadian government’s $4-billion infrastructure stimulus fund launched in last year’s budget as part of a temporary, two-year plan to see the country through a deep global recession — will continue until March 2011.
The value of the USIC deal was not disclosed. It is expected to close in the current second quarter.
The company employs about 3,000 people and has annual revenues of just under US$300 million, Renaud said.
Tuesday’s transaction is the second private equity investment in the U.S. led by OMERS Private Equity. Last year it acquired Nordco Inc..
Wisconsin-based Nordco provides equipment and rail infrastructure services to North America’s rail companies and has plants in Oak Creek, Wis., and Oshawa, Ont..
Michael Stayton, president and CEO of USIC, said he welcomes the takeover because “OMERS has the resources, expertise and long-term focus to support USIC in its strategy going forward.”
OMERS Private Equity said the acquisition will be financed by GE Antares and European bank BNP Paribas.
OMERS is one of Canada’s largest pension funds, administering the pension plan and paying retirement benefits to 400,000 municipal government employees and retirees. It has more than $4 billion of investments in North America and Europe in a range of businesses.
The transaction reflects a growing trend among Canadian pension funds to invest in hard assets, infrastructure and other businesses to diversify the industry’s investments away from bonds and the volatile stock market, which produced huge losses in 2008 before recovering last year.
Canada’s pension fund giants — including the Caisse de dépôt et placement du Québec, the Ontario Teachers Pension Plan Board, OMERS, and the Canada Pension Plan Investment Board — have made acquisitions in a number of sectors 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.
OMERS pension fund taps into U.S. infrastructure spending with acquisition
Indiana-based USIC provides construction support services for more than 400 utilities across the U.S.
- By: Sunny Freeman
- April 20, 2010 April 20, 2010
- 12:59