Toronto-based Hudson’s Bay Co, which also owns Lord & Taylor, announced its acquisition of Saks Fifth Avenue, bringing three retail brands under one roof. To finance the the $2.9 billion transaction, Hudson’s tapped the usual array of banks. But it is also getting $500 million in financing from the Ontario Teachers’ Pension Plan, the largest public retirement fund in Canada with almost $130 billion in assets.
It’s unusual for a pension plan to provide deal financing, but the Ontario Teachers has long been ahead of the field in the retirement fund world. As part of its unique positioning, the pension fund is a dealmaking powerhouse, at times going up against the largest private equity firms like KKR and Blackstone in deal auctions. Not only does it compete, but it often wins, as it did in the race to buy Heartland Dental Care last year.
The pension fund has been prolific in mergers and acquisitions; It owns everything from telecommunications firms to a lottery operator to snacks food companies. The Ontario Teachers’ new Natural Resource Group recently did its first deal, acquiring a stake in the Weyburn Unit oil asset in Canada. It’s also expanding its global footprint by opening an office in Hong Kong. In 2007, it set up a presence in London to cover investments in Europe, the Middle East and Africa.
Unlike many pension funds that are largely staffed by government bureaucrats, Ontario Teachers gets a leg up by paying more and hiring professional dealmakers, such as former Credit Suisse banker Raju Ruparelia. Some large pension funds in the US have been looking to catch up with Ontario Teachers by doing their own deals, but because US pension funds are run more conservatively, they tend to lose talent to Wall Street, which offers better salaries.
Ontario Teachers should have more leeway to take on more risk, now that it has made a deal with its government and union sponsors to eliminate $10 billion of its debt. That could mean more investments in emerging markets or more private equity deals. Whatever the moves, they’re bound to be more aggressive.