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Ontario-based Enercare rents and sells equipment such as water heaters, furnaces, air conditioners and water purifiers. It was taken private by Brookfield in 2018.Getty Images/iStockphoto
Public Sector Pension Investment Board is paying $1.6-billion to acquire a 50-per-cent stake in Ontario-based home services company Enercare Inc. from Brookfield Asset Management Ltd. BAM-T, betting on essential services as a hedge against a potential rise in inflation.
Brookfield took Enercare private in 2018 in a deal worth $4.3-billion including debt. Since then, PSP Investments has had a small, passive stake in the company as a co-investor with Brookfield, and is now taking over joint ownership with Brookfield.
Markham, Ont.-based Enercare rents and sells equipment such as water heaters, furnaces, air conditioners and water purifiers, as well as protection plans to cover them, to more than 1.4 million homes and businesses in Canada.
The company has a leading market share in Ontario. Since Brookfield took the company private, it has expanded its services into Quebec and is beginning to make a push into Western Canada.
“We just think it’s really a strong, long-term business for us,” said Andrew Alley, PSP’s global head of infrastructure investments, in an interview.
PSP declined to disclose Enercare’s current enterprise value, including any debt it carries. But the company’s “customer base has been growing, as has the product offering,” Mr. Alley said.
Enercare earns much of its revenue from rental contracts with customers, which provide a relatively stable and predictable stream of revenue. PSP is making its investment through a portfolio in its infrastructure arm that holds assets expected to perform well when inflation rises, which in turn helps protect the value of long-term pension liabilities.
“We look for things that provide stability over the long-term, so essential infrastructure assets,” Mr. Alley said. “We are looking to grow the portfolio. This is a helpful addition to that.
PSP and Brookfield plan to keep Enercare’s management team in place and add to its customer base, in part by introducing new products and services.
PSP manages $321-billion for pension plans in the federal public service, the Canadian Forces, Royal Canadian Mounted Police and military reserves.
The deal to buy half of Enercare adds to PSP’s $75-billion portfolio of investments in Canada, which the pension fund aims to increase to $100-billion in the next few years.
PSP chief executive Deborah Orida made the domestic investment pledge at the Canada Investment Summit in September, which was led by Prime Minister Mark Carney. Ms. Orida and Canada Pension Plan Investment Board CEO John Graham were summit co-organizers.
“We’re encouraged by the opportunity set in Canada,” Mr. Alley said. “Canada is stacking up very well on how it aligns with our areas of focus.”
PSP made more than $10-billion in investments in Canada last year.
Looking ahead, the pension fund is showing a keen interest in the federal government’s plan to open up the country’s four largest airports to private investment through long-term agreements. PSP already owns stakes in seven airports in cities such as Athens, Düsseldorf, Hamburg and Glasgow through its AviAlliance subsidiary, which manages operations.
Mr. Alley said digital services and energy are other priority areas for investment in Canada that align well with PSP’s strategy.
Brookfield, which is incorporated in Canada, also holds its Enercare stake in its infrastructure division. The asset manager has been looking for opportunities to sell assets and recycle capital, and outlined a plan to turn over more than US$2-billion of assets this year at a September investor presentation in Toronto.
BMO Capital Markets and TD Securities were financial advisers to PSP, and CIBC Capital Markets and Scotiabank advised Brookfield.
Blake, Cassels & Graydon LLP acted as PSP’s legal counsel, and McCarthy Tétrault represented Brookfield.