Teachers’ shows hunger as single investor

The principal investment arm of the Canadian pension fund has announced the $840m acquisition of pet food manufacturer Doane Pet Care from a group of private equity firms including JP Morgan and DLJ.

Toronto-based Teachers’ Private Capital, the private equity arm of the Ontario Teachers’ Pension Plan, has agreed to acquire Doane Pet Care Company, a Brentwood, Tennessee-based manufacturer of pet food, for approximately $840 million (€687 million) from a group of private equity firms led by JP Morgan Partners.

The transaction represents the culmination of a 10-year investment period for JP Morgan and two of its partners, DLJ Merchant Banking and CapStreet Group (formerly known as Summit Capital), who first acquired the predecessor to Doane Pet Care in 1995 for $249 million, including $57.5 million of equity, according to documents filed with the Securities and Exchange Commission. Over the past 10 years, the company has expanded through a series of acquisitions, both in the US and Europe – through one of those acquisitions, the $184 million merger with Windy Hill Pet Food in 1998, another private equity firm, Bruckman Rosser Sherrill, also became an investor in the company. JP Morgan, which owns approximately 35 percent of Doane, reportedly generated a return of three times its equity investment.

The US is a key market for us.

Jim Leech, senior vice president, Ontario Teachers’ Pension Plan

The current deal also marks the largest private equity transaction that Teachers’ has participated in as a single investor. Though the firm has been an active player in the Canadian markets over the past several years, it has only recently set its sights on the US. In December of last year, the private equity investor entered into its first ever US deal when it agreed to acquire Alliance Laundry Systems from Boston-based Bain Capital in a $450 million buyout. Earlier this month, the firm, alongside Ares Management, acquired a majority stake in mattress manufacturer National Bedding for an undisclosed price.

Jim Leech

Given the limited size of the Canadian market, Teachers’ focus on private equity outside of its home country is expected to continue. “The US is a key market for us,” said Jim Leech, senior vice president of Ontario Teachers’ Pension Plan, in a statement.

Teachers’ Private Capital manages more than C$7 billion in assets for the C$88 billion Ontario Teachers’ Pension Plan. For the fiscal year ended March 31, 2005, the pension plan generated a return of 14.7 percent, including a gain of 21 percent in Canadian public and private equities.