Canada private-equity buyouts look set for record

By Nicole Mordant

VANCOUVER, British Columbia (Reuters) - Buyouts of Canadian companies by private equity investors are on track for a record year, an industry body said on Tuesday, but Canada still lags the blistering pace set in the United States and Europe.

Buyout firms, which take control of businesses, restructure them and try to sell them for a profit, invested $5.1 billion in Canadian businesses in 36 disclosed deals in the first quarter of this year, Canada's Venture Capital & Private Equity Association (CVCA) said.

That is more than the total $4.5 billion invested in 2005, and almost half of last year's $11.3 billion spent in 92 deals.

"We are roughly on pace to double last year's record performance, which more than doubles the prior year's performance. Clearly the buyout market continues to accelerate," said CVCA president Rick Nathan.

Fueled by unprecedented fund-raising, healthy debt markets and high returns, private equity buyouts have surged globally.

Last year, firms conducted about $700 billion of buyouts worldwide, the bulk of that in the United States.

"Even though we have had this tremendous growth in the Canadian market, we are barely keeping up with the rest of the world and falling a little farther behind the U.S., which continues to accelerate," Nathan said at a presentation in Toronto, which was monitored by phone.

More than $120 billion worth of buyout transactions occurred in the United States in the first quarter, Nathan said.

Roughly half of the $5.1 billion invested in Canadian companies in the first three months of the year came from investors in Canada, with the balance from U.S. funds.

Onex Corp. (OCX.TO) is Canada's best-known buyout firm. Other large players include Birch Hill Equity Partners Management, Torquest Partners, Richardson Capital Management and EdgeStone Capital Partners.

Canada's big public sector pension funds are also becoming increasingly active in private equity deals.

The CPP Investment Board, the investment arm of the Canada Pension Plan, is leading a consortium of other pension funds wanting to take BCE Inc. (BCE.TO), Canada's biggest telecommunications company, private.

With a market value of around $27 billion, BCE's privatization would rank as Canada's biggest transaction yet.

Canadian investors are increasingly active in foreign markets, Nathan said, with domestic buyout firms investing $5.1 billion abroad in the first quarter.

($1=$1.10 Canadian)