The Caisse is committing the irreparable by selling its shares in our flagship aeronautic company Héroux-Devtek.
Without the approval of the Caisse de dépôt et placement for the sale of Héroux-Devtek to the American firm Platinum Equity, the transaction had little chance of materializing.
With its block of shares (14.3%), plus that of the FTQ Solidarity Fund (10.9%) and that of Investissement Québec (1.2%), for a total of 26.4% of Héroux-Devtek’s outstanding shares, the Caisse would thus have been able to lead a FIERCE fight against Platinum Equity’s purchase offer.
All the more so since François Legault and his super-powerful minister Pierre Ftizgibbon could have gotten involved in the matter by publicly expressing their disapproval of the sale of this other Quebec jewel to the Americans. If they wanted to, of course.
In any case, it is too late! The Fund has committed the irreparable.
ÉMOND & SABIA SAME APPROACH
After seeing former CEO Michael Sabia give the green light to the Caisse’s sale of RONA to the American giant Lowe’s, his successor Charles Émond is following suit by agreeing to give the green light to the sale of Héroux-Devtek to the American fund Platinum Equity.
As the largest shareholder of Héroux-Devtek, the world’s third largest manufacturer of landing gear, the Caisse has committed to supporting the transaction by selling its block of shares.
What a brilliant move by Platinum Equity’s management! They made sure to get the Caisse on their side, which is not only Héroux-Devtek’s main shareholder, but also the Quebec government’s powerful sovereign wealth fund with $430 billion in net assets.
With this official mega-support from the Caisse, the die is cast.
François Legault and Pierre Fitzgibbon are literally stuck with the Caisse’s decision to support the sale of Héroux-Devtek to the American company. I doubt they will dare publicly express their disapproval. Fitzgibbon’s office had not been informed of the transaction before it was announced.
For their part, the FTQ Fund with its 10.9% block and Investissement Québec with its 1.2% block, whether they agree with the transaction or not, can do nothing to block the Americans’ takeover of Héroux-Devtek.
The FTQ Fund has not yet taken an official position. But in light of the reaction of Dany Pelletier, Senior Vice-President of Private Equity and Impact Investments at the Fonds de solidarité FTQ, the fund will not wage open war against the sale of Héroux-Devtek to the American fund.
“The Fonds de solidarité FTQ is satisfied with the progress made with Héroux-Devtek and we will remain ready to discuss their growth in the future. This is a company we can be proud of and we understand the desire behind this transaction, but we would have preferred a scenario with local partners.”
“Although we do not have control over this matter,” adds Dany Pelletier, “we understand that it is impossible to prevent an entrepreneur from selling his business at the time of his choosing… Whether he is for or against, the vote [du Fonds FTQ] “implies a great responsibility towards the company, as well as potential commitments. Héroux-Devtek needs a significant amount of capital to bring it to fruition with its plan and the management of the company wishes to proceed with this transaction.”
PROMISES, PROMISES…
After having sold the C Series to the multinational Airbus (the French, German, Spanish and British aircraft manufacturer) for next to nothing, the “master in our house” of our aerospace sector is going to lose even more feathers with the sale of Héroux-Devtek to the American firm Platinum Equity.
Foreign companies may well promise the world when they acquire our flagships, but the fact remains that the major decisions concerning the future of their Quebec subsidiaries are made abroad. We are at the mercy of foreigners.
And as we saw with Lowe’s takeover of RONA, the result was catastrophic for this former flagship of Quebec hardware! Lowe’s also sold it for peanuts by selling the company to an American fund.
The same happened with Cirque du Soleil when Guy Laliberté sold it in 2015 to the American fund TPG and its two minority partners, the Chinese group Fosum and the Caisse de dépôt et placement. After declaring bankruptcy, Cirque was acquired by the Toronto fund Catalyst Capital.
THE TRANSACTION
The acquisition of Héroux-Devtek will cost Platinum Equity the sum of 1.35 billion Canadian dollars. Given the weakness of the Canadian dollar against the American currency, the purchase of our flagship company costs less than a billion US dollars. This represents a great deal for this American private equity investment firm headquartered in Beverly Hills, California.
I find it distressing that the Caisse allowed Platinum to get its hands on Héroux-Devtek instead of doing everything possible to find a Quebec buyer.
And to think that the Caisse will ultimately only collect gross revenue of $156 million from this transaction to sell Héroux-Devtek to foreigners.
What a blunder!