Private Equity Deals & Transactions

OMERS expands ownership in takeover target Teranet

The move follows Teranet’s rejection of the pension fund’s hostile bid to acquire the company for C$11 per share. The offer, made three weeks ago by an affiliate of the fund’s infrastructure arm, Borealis Infrastructure, valued the Toronto-listed income fund at C$2bn.

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Borealis Infrastructure, the infrastructure investment unit of the Ontario Municipal Employee Retirement System (OMERS), has nearly doubled its stake in Teranet Income Fund as part of its attempt to acquire the Toronto Stock Exchange-listed provider of electronic land registry services.

Executed yesterday on the open market, Borealis’ latest purchase of 841,400 units in the fund follows two earlier purchases of 34,700 and 123,900 made on 28 September and 23 September, respectively. OMERS holds an additional 995,800 units, bringing the pension fund’s total ownership to just under two million units, or about 1.3 percent of total units outstanding.

Three weeks ago Borealis bid C$11 per unit to acquire Teranet in an offer that valued the company at C$2 billion ($1.9 billion; €1.3 billion), including C$470 million of assumed debt.

Teranet’s board of directors on Friday unanimously recommended that unitholders reject Borealis’ hostile bid, and said in a statement that the bid “fails to provide full value for the fund”.

The board also said that Teranet has executed confidentiality and standstill agreements with 10 parties to date, which may lead to superior proposals to unitholders. The Hospitals of Ontario Pension Plan, Teranet’s largest unitholder at 10 percent, has previously indicated that it was considering making a competing offer.

Teranet, which originated as a public-private partnership in 1991, provides exclusive access to the Ontario Electronic Land Registration System, which enables customers to conduct electronic registrations as well as title and writ searches relating to property. The monopoly is effective through 2017 and thereafter the licenses extend on a non-exclusive basis until 2047.

The resulting cashflow stream, both predictable and protected, is something very much coveted by pension funds like OMERS that typically look for investments with infrastructure or infrastructure-like cashflow characteristics.

OMERS is one of Canada's largest public pension plans, with more than C$52 billion in net assets invested on behalf of approximately 380,000 active and retired municipal employees and more than 900 local government employees in Toronto. It has a long-term asset allocation target of 20 percent to infrastructure.