Charterhouse sells ERM to OMERS PE for $1.7bn

OMERS takes the largest share in co-investment with AIMCo

Charterhouse Capital Partners has signed a definitive agreement to sell Environmental Resources Management to OMERS Private Equity, the private equity arm of Canada's OMERS pension plan, for an enterprise value of $1.7 billion, according to a statement.

The sale will deliver a 2.4x return on investment to Charterhouse, it is understood.

The direct investment is OPE's second with The Alberta Investment Management Corporation, following its £935 million ($1.45 billion; €1.3 billion) buyout of the UK's Vue Cinemas in 2013, in which the two Canadian investors were equal partners.

OPE head of Europe Mark Redman told Private Equity International that for the ERM acquisition, Omers was making the lion's share of the investment. “It's not a 50:50 deal. We are the largest institutional investor,” he said.

When asked about the structure of the financing for the transaction, Redman noted it was currently a “moveable feast” to be worked out with AIMCo and the ERM management. ERM's 600 partners will reinvest alongside OPE and AIMCo, the statement said.

Redman did say that he expected the company's existing debt would be rolled over upon completion of the deal.

ERM is an environmental and sustainability consultancy with more than 4,800 employees and operating in more than 42 countries. It reported revenues of $940 million in 2014, the statement said.

Charterhouse bought a 55 percent stake in the company for $950 million in 2011, with the remaining shares held by ERM's partners, the firm said in a statement. The investment was made through its ninth fund, a 2009-vintage vehicle that closed at €4 billion.

The five exits from Charterhouse Capital Partners IX, including ERM, have delivered an average return of 3x, it is understood. Eight investments remain and an investment in France's Comexposium is yet to close.

ERM made six add-on acquisitions with Charterhouse as an investor, it is understood.

Redman noted that the market in which ERM operates is “incredibly fragmented” and as well as organic growth, there were lots of opportunities for consolidation.

“That is something we would certainly look at. There is a strong pipeline. It will be pretty small-scale stuff,” he said.

Since its launch in 2009, OPE has completed five majority-control deals in Europe. This transaction brings the total capital invested in Europe to C$2 billion ($1.62 billion; €1.44 billion), the statement said.

The pension fund plans to do one or two private equity deals a year in Europe, Redman said. “We are traditional private equity investors,” he noted.

About a quarter of OMERS' total portfolio is in Europe, although “we don't think like that. We are trying to pick the best opportunities. ERM is a truly global business,” Redman said.

The ERM transaction is still subject to competition authority approval.

RBC acted as corporate finance adviser to OMERS PE, Allen & Overy were legal advisers, while Ernst & Young conducted the financial due diligence.