Government Fund Weekly News Roundup — CPPIB’s $4.6 Billion Petco Deal

November 27, 2015 by Loch Adamson

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The Canada Pension Plan Investment Board (CPPIB) teamed up with CVC Capital Partners to buy U.S. pet-store chain Petco. Government funds paid $7.5 billion for Australian electricity assets. Plus two sovereign wealth funds built on their New York real estate portfolios.

CPPIB Invests in Creature Comforts

On Monday, the $215 billion Canada Pension Plan Investment Board (CPPIB) announced one of the biggest private equity deals of 2015. The pension fund teamed up with London-based CVC Capital Partners to buy San Diego-based Petco Animal Supplies, which operates 1,400 stores across the U.S. and Latin America, for $4.6 billion. The partners obtained approximately $3 billion in debt financing to secure the deal.

The acquisition followed an extended game of cat-and-mouse between Petco and Arizona-based PetSmart, a rival pet-store chain. PetSmart had launched several bids to acquire Petco in 2014 and 2015, but talks repeatedly fell through — clearing the way for CPPIB and CVC to pounce.

The multi-billion dollar U.S. pet industry is now somewhat crowded with government investors. PetSmart was bought last year by a consortium that included the $195 billion Caisse de dépôt et placement du Québec (CDPQ), Singapore’s $343 billion GIC and the $84.7 billion Korea Investment Corp. Those investors paid $8.7 billion for PetSmart — almost twice the value of the Petco deal. Still, even in the uncertain world of international finance, America’s passion for pets looks like something of a sure bet.

More Infrastructure Deals Down Under

The fierce bidding war for TransGrid, an electricity distribution network in New South Wales, finally reached its climax this week — and a consortium backed by government funds emerged victorious.

The investor group, which came together under the name NSW Energy Networks, was led by two local infrastructure investors, Melbourne-based Hastings Funds Management and Sydney-based Spark Infrastructure; it also included CDPQ, the $621 billion Abu Dhabi Investment Authority and Wren House Infrastructure, a unit of the $592 billion Kuwait Investment Authority. The consortium paid the state government A$10.3 billion ($7.5 billion) for a long-term lease on the assets after beating several rival bids.

ADIA closed another infrastructure deal in Australia this week. The Abu Dhabi fund backed Melbourne-based toll-road operator Transurban Group’s A$1.8 billion purchase of AiportLinkM7, a motorway that connects Brisbane Airport with the center of the city. ADIA contributed A$131 million to the deal through its subsidiary Tawreed Investments.

SWFs Eye Real Estate Investments in NYC

In a busy week for ADIA, the fund also added to its portfolio of U.S. hotels. The fund acquired the London Hotel in Manhattan from New York-based alternative investment giant Blackstone Group for a reported $382 million. ADIA already owns two hotels in New York: the Hyatt Times Square and the Marriott Edition near Madison Square Park.

Meanwhile Norges Bank Investment Management (NBIM), the arm of the central bank that oversees Government Pension Fund Global, Norway's $830 billion sovereign wealth fund, formed a joint venture with Trinity Wall Street Episcopal Church to acquire a stake in the church's portfolio of 11 office properties in Manhattan's Hudson Square neighborhood. NBIM paid $1.56 billion for its 44 percent stake in the portfolio.

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