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Ontario Teachers' Comes Full Circle?
Invest in NZ reports, New Zealand Yellow Pages sale suspended:
The
Yellow Pages Group has suspended its planned sale of the business,
citing a satisfactory price as unattainable in the current economic
situation. The owners of the New Zealand business said they had
withdrawn their planned sell because they felt the business would not
achieve what they termed “a satisfactory price” in the prevailing
economic conditions.The firm’s
owners, Unitas Capital, based in Hong Kong but formerly known as CCMP
Capital Asia, and Canada’s Ontario Teachers’ Pension Plan purchased the
firm in 2007. Back then, the two firms paid 2.24 billion for the New
Zealand Yellow Pages. Whereas a number of interested parties had shown
great interest, the Yellow Pages Group shareholders, together with the
banking syndicate decided to close the planned sell, said the firm
Monday. The firm said it will not be pursuing the sell further.According
to the firm, the existing economic situation does not suit large scale
merger and acquisition activity and subsequently, the expectations of
the shareholders with regard to value are unlikely to be met in the
current market. The banking syndicate would now continue with plans to
restructure the company's debt, and planned to stick with the business
long-term.The move now means
the owners of Yellow Pages Group have effectively suspended
considerations for a potential buyer. As a result of the suspension,
the banking syndicate will now look to complete its already advanced
plans to restructure the debt and intend to take a long term view as
owners of the business.Yellow Pages’ Chief Executive
Officer, Bruce Cotterill, said it was good to have some clarity after
the uncertainty associated with the sale process and the related media
speculation. The banking syndicate has been working hard to achieve an
outcome that will take Yellow Pages into the future, he added. Yellow
Pages Group is keen on working with the banking syndicate to finalize
the debt restructure and move forward.According to Cotterill,
there are a number of extremely positive initiatives being developed
within the company at present, which will ensure our success in the next
few years. We are fortunate to have had a very supportive relationship
with our banking syndicate who have enabled that to happen.The
Ontario Teachers' Pension Plan (OTPP), commonly referred to as
Teachers', is the organization responsible for administering pensions
for public school teachers of Ontario. The OTPP also invests the plan's
pension fund, making it one of the largest and most powerful investment
groups currently operating in Canada.
One senior pension officer shared these thoughts with me:
OTPP
comes full circle. Jim Leech made his career by doing the Cdn Yellow
Pages deal. And he ends it by losing more money on a yellow pages deal
than he made on the original one. The OTPP story is over. It will take a
few years for this to become obvious. Not to be negative, but in
investing, one has to be brought to account. When your performance
reverts to below the mean, and the mean isn't very good, someone has to
call it.
I think this is somewhat harsh, but the truth is you can't just look at the deals that went well. You got to also look at the deals that went sour. And this same pension officer is skeptical about US state pensions funds taking the direct investing approach in private equity:
So,
the Canadian direct approach which is over-promoted by e.g. OTPP and
some other US groups (e.g. GM pension to name a more successful example
than Arkansas) is not really new or novel, and no large Cdn (or US as
far as I know) plan has EVER disclosed its direct investment IRR
separate from its funds (and noone actually reports IRRs). you can be
sure they would if the results were stellar. The only OTPP or OMERS
person who ever left and succeeded as a "real" general partner was
Michael Leigh, who left to start Oncap at Onex, which has since done
quite well. (Maybe Graeme Bevans who left CPPIB to Alinda Capital in
infrastructure will do well, we shall see).
Direct investing has its benefits (lowers fees, allows you to have more control), but there are plenty of pitfalls too. If pensions are too ambitious, and bite off more than they can chew, it will end up costing them. Nobody ever talks about direct deals that went bust, but there are plenty.
One final warning to pensions: stop hiring infrastructure and PE guys with only banking experience. Get some professionals with actual operational experience. A buddy of mine who is in charge of a major infrastructure project in Greece told me he's discouraged to see so many former bankers in top positions at public pension funds. I couldn't agree more (look at who populates the boards at these Canadian public pensions -- mostly former bankers).
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And if they'd just indexed every dime, not involved hedgies or PE, and let the computers run it without human intervention, this would never, ever have happened.
Investing in the Yellow Pages?? In this day and age they may as well be investing in casette tapes and buggy whips.
I feel bad for the OTTP. I would like to help them out by selling them my rights to an upcoming 8 track tape museum.
"Life moves fast and you have to move fast with it..." Ferris Bueller
I'm sure this is no problem for the long-term growth of the Ontario Teachers' Pension Plan --- anything they lose on the New Zealand Yellow Pages will undoubtedly be more than made up for by their gains on Chinese solars. And if perchance that does not work out, there is always the infinitely-rich Canadian government to bail them out via their Keynesian money tree. Isn't that the lesson that we are supposed to have learned over the last two years: that there is no problem which cannot be solved via government (deficit) spending?
And don't forget that retirerment systems should never, NEVER invest in anything as risky and unedible as gold.
What! Invest in something physical, instead of sound third-, fourth-, and fifth-party paper promises? Why, that would be positively antedeluvian!
If mortgage-backed securities based on defaulted and/or nebulously-titled subprime loans are good enough for the US Federal Reserve, then by God they are good enough for the rest of us!
Well looked who just walked in from their back 40 placer claim!
Hey buddy! Good to see you here too!
Still out there bashing Nadler, I hope?