CDPQ inks its largest direct investment

The pension expects its investment in security services provider Allied Universal to complement its real estate portfolio.

Caisse de dépôt et placement du Québec (CDPQ) has made its largest private equity direct investment yet in North American security services provider Allied Universal.

The C$309.5 billion ($234.9 billion; €207 billion) Canadian pension plan acquired Allied alongside company management and Warburg Pincus and Wendel, a European listed investment firm, in a transaction that valued the company at more than $7 billion.

CDPQ’s investment includes approximately $400 million to be used by Allied to pursue its growth strategy and execute its M&A opportunities, according to a statement

Allied Universal is a leader in a growing and resilient industry and is well positioned to take advantage of growth opportunities, both organically and through acquisitions, a source close to the transaction said, adding that CDPQ sees opportunities in continuing to grow the business through acquisitions in both the manned guarding and security technology sectors.

The Allied Universal investment will complement CDPQ’s investments in other asset classes, in particular real estate through its subsidiary Ivanhoe Cambridge, according to the source.

Last year, Ivanhoe Cambridge repositioned its portfolio and increased its investments in industrials and logistics to capitalize on e-commerce growth and to complement the shopping centres in its portfolio.

CDPQ’s C$42.9 billion private equity portfolio accounts for 13.9 percent of CDPQ’s C$309.5 billion total portfolio.

The private equity portfolio has changed significantly over the last few years, with an increased focus on direct investments, and with fund investments making up a decreasing share. Direct investments account for more than 75 percent of the portfolio.

In an interview in September, CDPQ’s executive vice-president and head of private equity Stephane Etroy told Private Equity International the pension is happy with the current ratio of fund investments to direct investments and co-investments

“Even though today funds is a minority of what we do, funds and co-investments and direct investments are all going to grow with us over the next three years by 50 percent on average,” he said.

Private equity generated net investment gains of $17.7 billion over the last five years, and returned net 16.6 percent for one year and 12.8 percent over five years as of 31 December, according to CDPQ’s latest results.

CDPQ pursued investments in sustainable industry, technology, logistics and renewable energy in 2018. It deployed more than $9 billion internationally last year, with direct investments including in Techem, FNZ, Groupe Delachaux, Avison Young and SURA Asset Management.

Other direct investments include Eurofins, AlixPartners, SPIE, MyEyeDr, TVS Logistics Services Limited, Greenstone, Foncia and Edelweiss.

CDPQ’s private equity investments were split between the US (34 percent), Canada (31.4 percent), Europe (26.4 percent), and growth markets and others (4.1 percent each), as of 31 December, 2017.

Click here to read our in-depth interview with CDPQ’s executive vice-president and head of private equity Stephane Etroy