Friday, October 1, 2010

Full Plate for Teachers' New Private Equity Head?

Tara Perkins of the Globe & Mail reports, A full plate for Teachers’ new private equity head:

The new head of the Ontario Teachers’ Pension Plan’s $10-billion private equity portfolio will have to hit the ground running when she assumes the position in mid-October.

Jane Rowe, who spent more than two decades at Bank of Nova Scotia, steps into the role at a time when Teachers is looking at selling one of its key holdings and taking another public. At the same time, the overall private equity sector is still struggling to bounce back from the financial crisis. Private equity returns have been improving, but lag behind those of the public markets, according to London-based Preqin.

A Newfoundland native, Ms. Rowe joined Scotiabank’s corporate banking division in 1987 as an account manager and rose through the ranks to become executive vice-president of special accounts management and retail credit risk. She will leave the bank effective Oct. 14.

She is filling a gap that opened in April, when Teachers’ former head of private equity Erol Uzumeri resigned to start his own money management firm.

Meantime, one of Teachers’ key holdings, GNC Acquisition Holdings Inc., is preparing for an initial public offering, and Teachers’ has put GCAN Insurance Co. on the auction block, according to sources.

Intact Financial Corp. is believed to be among the prospective bidders for GCAN, a list that also includes a number of foreign insurers and financial players.

Teachers’ Private Capital bought GCAN in 2005 from a consortium that included Canadian private equity firm Torquest Partners Inc. and CIBC Capital Partners. At the time, Teachers chief executive officer Jim Leech called the deal an “exciting new opportunity” for Teachers to invest in the insurance sector.

GCAN was established in 1955 by the Gerling Insurance Group and is now a leading Canadian industrial and commercial insurer. It had $851-million in total assets at the end of 2009, up from $738-million in 2008, and earned $27.9-million last year, up from $17-million.

As that potential sales process plays out, nutrition retailer GNC has filed documents with U.S. regulators paving the way for an IPO. Teachers and Los Angeles-based private equity firm Ares Management LLC bought Pittsburgh-based GNC in 2007 in a deal that valued the retailer at $1.7-billion (U.S.). GNC’s previous owner, Apollo Management LP, had tried to take the vitamin chain public but was never able to get an offering off the ground.

Following the IPO, Ares and Teachers will continue to hold more than half of the class A common stock of GNC and will have the power to control its affairs and policies, including the election of directors, the company said in documents filed this week with the U.S. Securities and Exchange Commission.

GNC, which earned $51.1-million (U.S.) in the first six months of this year, up from $37.4-million in the same period a year ago, said it’s undergone a number of changes in recent years. Those include an increased focus on proprietary products, a revamped e-commerce business, and upgraded point-of-sale systems. As of the end of 2009, the retailer had 167 company-owned stores in Canada and 1,307 franchised stores in 47 countries. It’s looking to expand its international operations, including plans to enter China.

Ms. Rowe replaces Erol Uzumeri, who left Teachers in May to form a new private equity firm Searchlight Capital Partners with Eric Zinterhofer, the the former co-head of media and telecom for Apollo Management and Oliver Haarmann, Kohlberg Kravis Roberts & Co.'s head of European communications and media.

One senior PE pension officer had this to share with me:

She is a great golfer! I don't know her well, but suspect she is a people manager who rotated through many of the bank's operations, and has some work out experiences, playing the heavy on Canwest gave her profile. Probably the right skills for the OTPP given a difficult portfolio legacy that will take years to roll off, and the team is large and could use some leadership.

I don't know her either, but I like Newfoundlanders and I am glad to see another woman in charge of a major division of a large Canadian public pension fund. The most impressive senior officer I ever worked for was Edmée Métivier, Executive Vice President, Financing and Consulting at the Business Development Bank of Canada (BDC). She is simply the most outstanding senior manager I ever had the privilege of working with -- smart, competent, hardworking, great leadership and especially people skills.

Ms. Rowe has her work cut out for her, but if I were her, I would contact Edmée and see how Teachers' Private Equity can work with the BDC on various mid-market deals in the Canadian space. I would also contact a couple of other senior PE officers in Canada, including two of her fellow Newfoundlanders working at PSP Investments.

She has to deal with legacy issues, which are going to weigh on the portfolio for a while. She definitely has a full plate to deal with, but it sounds like she's got the right skill set to tackle the challenges that await her at OTPP.

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