Say what you want about the lowly tuna, but this is one fish that will never go out of style.

As such, a company that processes and sells tuna makes a nice candidate for a Canadian income fund, which distributes most or all of its cash flow to unit holders.

Canada's thriving market for income funds is beginning to attract interest from US private equity firms, which are looking for creative ways to exit investments.

Last month, New York buyout firm Centre Partners Management achieved a partial exit for portfolio company Bumble Bee Seafoods – known for its canned tuna – through a merger with Connors Bros. Income Fund. Connors is the world's largest producer of canned sardines. Add in Bumble Bee's line of salmon and specialty seafood products, and you've got a swimmingly diverse revenue base.

Bruce Pollack (really), a managing director at Centre Partners, says his firm first came to know the charms of the Canadian income fund exit through an investment in a Toronto-based consumer bleach company called KCP. After a roll-up strategy launched in 1997, the company was sold in 2002 to a trust at a multiple of 8.5 times EBITDA, allowing Centre to exit its investment. The trust was then listed on the Toronto Stock Exchange. KCP Income Fund currently yields 11 percent.

“If you have a stable cash flow, you get a pretty high multiple,” says Pollack. Following the Bumble Bee transaction, Centre Partners will continue to own 31 percent of the combined company.

Listing as a Canadian income fund is attractive to corporations because the operating entity is not taxed. Instead, individual unit holders are taxed based on dividends received. In 2002, Canadian law firm Blakes Cassels & Graydon counted 92 Canadian income funds.

Centre Partners isn't the only US firm hooked on Canada's exit potential. In August, American Industrial Partners exited its investment in Great Lakes Carbon, a maker of calcined petroleum coke, through a listing on the Toronto exchange as an income fund. The firm reported a 2.3 times return on its investment.

The same month, KKR and the private equity arm of the Ontario Teachers' Pension Plan listed an income fund based on the ultrasteady cash flow of Canada's Yellow Pages Group. The fund currently yields more than 7 percent.

Income trusts have just arrived in the USA in the form of Income Deposit Securities (IDS), a creation of the American Stock Exchange. In December, the first IDS began trading – Volume Services America, a catering company that had received an investment from none other than The Blackstone Group and GE Capital. Most of the work on this debut IDS was done by Canada's CIBC World Markets.

Centre Partners is about to turn another of its portfolio companies into an IDS – American Seafoods, a processor of fruits de mer.

With public-market investors increasingly showing a passion for meaningful dividends, Pollack says investment bankers are calling him to learn about income funds on both sides of the border. If the demand for fish is good enough to create one of these exit-friendly vehicles, imagine the possibilities for the rest of the buyout universe.

New York-based buyout house Clayton Dubilier & Rice has agreed to acquire VWR International from pharmaceuticals group Merck in a $1.65 billion (€1.29 billion) transaction. The firm will commit $600 million from its Fund VI, a $3.5 billion vehicle, and will be joined by a syndicate of banks led by Citigroup and Deutsche Bank that will arrange senior loans and manage a bond offering. CD&R was one of seven parties bidding on VWR, which had 2003 revenues of approximately $2.8 billion. The firm's Funds V and VI have already returned nearly $2 billion to LPs.

The Chicago-based private equity firm has agreed to sell Aurum Technology to publicly traded Fidelity National Financial for $305 million (€240 million). Approximately $175 million will be provided in cash and $130 million in Fidelity stock. Willis Stein originally acquired Aurum, which provides check imaging, ATM processing and branch automation, in December 1999 from EDS' Community Banking Services Division.

Global private equity firms Warburg Pincus and The Blackstone Group have backed the launch of a $300 million (€237 million) energy exploration and production venture in Western Africa called Kosmos Energy. The firms will fund the acquisition, exploration and development of oil and gas ventures in an area extending from Morocco past Angola, including offshore oil resources along Western Africa's Atlantic Margin. Warburg Pincus, with $5 billion under management, has already sunk approximately $800 million into energy companies involved in oil and gas exploration and production since the late 1980s.

In its debut control-oriented distressed deal, Quadrangle Group, the New York media and distressed specialists, has purchased a majority stake in loss-making security services company Protection One for $122.2 million (€95 million). The deal will see an 87 percent equity stake in Protection One transfer to Quadrangle from debt-laden Westar Energy, the largest electric utility in Kansas. This is a first controloriented deal for Quadrangle's distressed debt team since Michael Weinstock, Andrew Herenstein and Christopher Santana defected from New York's Lazard office in March 2002. Quadrangle was formed in 2001 with the closing of a $1.08 billion media- and communicationsfocused private equity fund. The firm was founded by Peter Ezersky, Steven Rattner, Joshua Steiner and David Tanner, all former Lazard media investment bankers.

The sale of The Hillman Companies provided a profitable exit for publicly traded investment firm Allied Capital, which will realise a profit of about $192 (€153 million) million, according to the firm. Middle-market buyout firm Code Hennessy & Simmons is based in Chicago. Hillman, based in Cincinnati, Ohio, manufactures keymaking equipment and key blanks.

New York's Behrman Capital said the recapitalisation of Woodcraft Industries will return about $38 million (€30 million) to investors, or more than 50 percent of the original equity investment made 11 months ago. Woodcraft, a maker of doors and kitchen cabinets, issued $120 million in high-yield notes. Thanks to the robust debt markets, buyout firms have recently returned capital to investors by taking on new loans and paying dividends with the proceeds.

The Washington, D.C. firm bought SEA, the lead contractor for the US Navy's Space and Naval Warfare Information Technology Center, in a transaction valued at approximately $100 million (€79 million). The addon is the second deal in Arlington Capital Partner's strategy to build a government services-focused IT platform. Last March, Arlington, which has more than $450 million in committed capital, put $75 million in a platform company called ITS Services, headed by three former senior executives of federal IT services company BDM International.

The New York firm acquired Scientific Protein Laboratories, a maker of ingredients for end-use pharmaceuticals, from the global pharmaceutical giant in a deal worth $81 million (€63 million). The deal is Arsenal's fifth portfolio acquisition for its debut fund, which closed last June on $300 million.

The Boston consumer and retail buyout firm bought the menswear conglomerate from RCS Media-Group for $73 million (€57 million). Joseph Abboud, with an annual revenue of approximately $125 million, focuses on menswear, accessories and home furnishings with brands JA Apparel, Riverside Manufacturing and Nashawena Mill. The three divisions are being added to JW Childs Associates' platform company, JA Holding. JW Childs currently manages $3.4 billion; last year, the firm sold petfood company Meow Mix to New York-based The Cypress Group, for $430 million, nearly double the price it had paid only 18 months earlier.

The Boston-based private equity firm bought all the shares of OCA, which is the oldest private postal system in Argentina. Since December 2002, OCA has been operating under Argentinean bankruptcy protection amid a nationwide recession. The company currently has $280 million (€223 million) in debt. The firm, which manages about $6 billion, has been in Latin America since 1996 and is currently invested in 21 Latin American companies with a total enterprise value of $800 million.

One Equity Partners' purchase of the bill processing services provider for telecommunications companies represents the firm's ongoing roll-up in this space. The firm, which is an affiliate of Chicago-based Bank One, also announced two earlier acquisitions over the last three weeks – TSL, an IT financial management services company, and Digital Reliance, a wireless telephone service billing data processor. One Equity receives all of its capital from parent company Bank One, which recently announced its acquisition by JP Morgan Chase. It is unclear how or whether the One Equity team, led by Richard Cashin, will be integrated into JP Morgan Partners, JP Morgan's in-house private equity group.

The two Boston private equity firms today announced an investment in Bartlett Nuclear, which provides radiological protection services to the US nuclear industry. Merrill Lynch Capital and the Royal Bank of Scotland will provide new debt financing to the company, and Bruce Bartlett, the company's founder, will retain an undisclosed stake in Bartlett Nuclear. The company's customers include nuclear power plants, general contractors for the US Department of Energy, and universities. Berkshire Partners most recently closed its sixth fund on a $1.7 billion (€1.34 billion) in 2001 after a relatively short seven months. Summit Partners closed its sixth fund on $2 billion in 2001.

Cambridge, Massachusetts-based private equity firm General Catalyst Partners and Palo Alto, California-based venture capital firm Accel Partners are taking equal stakes in BBNT Solutions from US telecommunications giant Verizon. The sale by Verizon is part of the company's strategy to divest assets not directly related to its core strategy. BBNT, founded in 1948, is known for creating ARPANET, the forerunner of today's Internet, as well as the first network e-mail, which established the “@” sign as an e-mail address icon.

The deal is the first collaboration between General Catalyst and Accel. General Catalyst managing director David Fialkow said the partnership would prove advantageous because Accel has “a great track record in building technology companies.” Also, Fialkow said the East Coast and West Coast presence would help BBNT expand its services.

The firm is partnering with fellow Los Angeles-based private equity firm Diversified Investment Management to head a majority investment in the bankrupt Southeast and Mid-Atlantic US restaurant chain. News sources report the transaction to be worth at least $80 (€64 million). The Yucaipa Companies invests in the retail, logistics and manufacturing industries, but the firm is best known for executing a series of major grocery chain mergers and acquisitions. The firm owns Jurgensen's, Falley's, and Alpha Beta, among other chains.

The New York-based middle market firm first made a significant investment with management in familyrun Spinrite in a transaction valued in excess of $50 million (€39 million). Founded in 1952, familyrun Spinrite manufactures and markets craft yarn products. A few days later, Sentinel Capital Partners bought Nivel, a manufacturer and distributor of aftermarket golf car replacement parts and accessories, from KODA Enterprises.

The Chicago private equity firm is leading a $50 million (€40 million) investment in WNC Insurance Services, with additional equity is coming from Chicago-based private equity firms SE Capital and PPM America. WNC provides lenderplaced and voluntary property and casualty insurance for financial institutions and is a managing general underwriter, which means the company acts as a distribution partner for its insurance carriers.