(Bloomberg) – Canada’s pension funds, money managers and corporations went on an overseas buying spree in 2015 to acquire a record-setting $205 billion in foreign assets, driving the country’s deal total to an eight-year high.
In all, there were $281 billion worth of mergers and acquisitions involving Canadian firms through Dec. 30, up 34 percent from a year ago, according to data compiled by Bloomberg. It was the second-highest total on record behind 2007, when Canadians were involved in $315 billion worth of transactions, the data show. The figures and rankings are based on announced date and subject to change as more deals are recorded.
The size of the deals involving Canadian firms were also uncharacteristically large last year with the four biggest deals worth in excess of $10 billion for the first time since 2006, according to the data.
The volume of foreign acquisitions by Canadian firms almost tripled in 2015 from last year, to a record $205 billion. That’s almost double the previous peak of $112 billion in 2007.
“Our central thesis has been to bring Canada to the world and the world to Canada and that remains intact. The pension funds are clearly a dominant factor here,” said Bruce Rothney, chief executive officer of Barclays Plc in Canada.
Canada Pension Plan Investment Board led the charge for outbound acquisitions — the country’s largest pension fund was involved in roughly $60.4 billion worth of deals last year, the data shows. That included its largest solo acquisition to date, when it agreed to buy General Electric Co.’s U.S. leveraged loan business from GE Capital in June in a deal valued at $12 billion.
The weak Canadian dollar has had little impact on cooling the market for outbound investment because the Canadian firms are essentially buying foreign revenues and, in the case of the pension funds, they have long-term horizons, Rothney said.
JPMorgan Chase & Co. was the top financial adviser in 2015, advising on a record $124 billion of transactions involving Canadian firms for any one adviser, the data compiled by Bloomberg show. JP Morgan was followed by Bank of America Corp.’s Merrill Lynch, Morgan Stanley, Royal Bank of Canada and Goldman Sachs Group Inc. (which nearly tied for fourth) and Barclays in fifth place.
David Rawlings, Canada senior country officer for JPMorgan, said the big international banks benefited from the push by Canadian pension funds and corporations to diversify geographically. JPMorgan often found itself advising the Canadians on their global ambitions or advising their targets, he said.
“We score well because we worked on both sides of the border,” he said in an interview. “We’re really well covered on the bigger ones.”
JPMorgan’s list includes two of the year’s most contentious transactions. The investment bank is an adviser to Suncor Energy Inc. on its CN $4.4 billion (U.S. $3.2 billion) hostile takeover of Canadian Oil Sands Ltd. Canadian Oil Sands’ shareholders have until Jan. 8 to tender their shares.
JP Morgan is also advising on Canadian Pacific Railway Ltd.’s proposed takeover of Norfolk Southern Corp., which is valued at roughly $27 billion in cash and stock. Norfolk Southern’s board has rejected Canadian Pacific’s overtures thus far.
If the railroad deal goes through, it would be the largest of the year involving a Canadian company or firm.
Rawlings would not comment on either situation. But he said he would expect there might be more opportunistic buying in 2016, especially in the energy sector where sinking oil prices are hammering producers’ shares.
“You generally start from the place where you want to do a friendly transaction,” he said. “But as companies become more confident and more opportunistic, you’re likely to see an increase in that type of activity.”
Outlook for 2016
Dougal Macdonald, Morgan Stanley Canada president, said he expects to see more large deals in 2016, especially when it comes to the pension funds. He noted that many of the larger transactions in 2015 were the result of unique circumstances, including the one-time selloff of more than $100 billion worth of GE Capital assets. That process attracted several Canadian buyers, including Canada Pension, Element Financial Corp. and the Bank of Montreal.
“We continue to be in a low-growth environment and so M&A is a tool that companies are using to enhance growth,” he said. “We would expect to continue to see large deals among the pension funds. But it will be very business-dependent because the leveraged-financed markets at this point are a little bit more discerning.”