October 31, 2001
The CPP Investment Board announced today that it has acquired a 10% ownership interest in NB Capital Partners, a merchant banking business started in 1999 and affiliated with National Bank of Canada and National Bank Financial.
The CPP Investment Board also committed $180 million over five years to private equity, venture capital and mezzanine debt funds managed by NB Capital Partners. The merchant bank has approximately $1 billion in capital under management. It has completed 35 direct investments, primarily in Canadian buy-out and early-stage companies. Despite the funds being less than two years old, the direct investments are already generating significant positive returns.
The CPP Investment Board acquired its 10% interest for $18 million, and has a four-year option to increase its ownership to 17% upon committing a further $185 million to funds managed by NB Capital Partners. At that time, the CPP investment Board would be an equal shareholder with National Bank Financial, while management, led by Samuel Duboc and Gilbert Palter, will continue to own the remaining shares. This is our third and largest strategic relationship with a Canadian merchant bank in just over two months and reflects the emphasis we place on forming dynamic relationships with well-managed general partners who are adept at finding and fostering private enterprise growth opportunities,” said Mark Weisdorf, the CPP Investment Board’s vice president responsible for private market investments.
The CPP Investment Board recently acquired a 15% ownership interest in Clairvest Group Inc. and a 26% equity position in Borealis Capital Corporation. To date, the CPP Investment Board has committed $745 million to private market investments, or nearly 7 percent of the $11 billion in assets reported on June 30, 2001. (Within 10 years assets are expected to exceed $130 billion.)
In June, the CPP Investment Board announced it would ultimately invest up to 10 percent of assets in private equity. The process involves commitments to external managers who draw down the funds over four or five years as suitable investments are identified. The CPP Investment Board currently invests in publicly traded equities with approximately 70 percent in funds based on the TSE 300 Index and 30 percent in U.S. and international index funds.Private market investments are expected to produce higher returns than public equities over the long term. A crown corporation created by an Act of Parliament in December 1997, the CPP Investment Board invests funds not needed by the Canada Pension Plan to pay current pensions. Cash flows are currently invested only in equities to balance the bond portfolio owned by the Canada Pension Plan. By increasing the long-term value of funds, the CPP Investment Board will help the Plan to keep its pension promise to Canadians. Located in Toronto, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm’s length from governments.
For further information contact:
Vice President – Private Market Investments