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January 14, 2013 10:51 pm

Ridley Terminals mandates Macquarie for privatisation

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This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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Macquarie Capital Canada has been hired to run an auction for Canada’s state-owned Ridley Terminals, two people familiar with the process told mergermarket. The government first announced its intention to sell the terminals last month.

Macquarie has been sounding out interested buyers for the coal and bulk commodity shipping terminal located in Prince Rupert, in northwestern British Columbia, since late December, the two people familiar said. The goal is to begin a formal sales process within the next couple of months and conclude a sale by the end of this year, the first person familiar said.

Strong interest has been expressed in the market both by strategic players and financial investors, predominately those with a significant presence in North America, the first person familiar said.

No decision has been made on whether or not to give any preference to single bidders or consortia or users who already have contracts signed with the facility, the first person familiar said. Potential bidders are being sounded out on their preferences for bidding structures, said the first person familiar.

The government of Canada, which announced on 13 December that the federal Crown corporation is being put up for sale, said it is seeking a private sector owner that will operate Ridley on a “long-term sustainable basis”. It also stated that a guarantee of open-access for multiple users is a non-negotiable condition for any sale.

The Canada Development Investment Corp (CDIC), a holding company that manages a handful of commercial holdings owned by the federal government, including Ridley, is acting as the agent for the government and is overseeing the sales process it mandated to Macquarie, the second person familiar said. It reports to Canada’s federal Department of Finance. Canadian national law firm Fasken Martineau DuMoulin is the legal advisor with the mandate to assist CDIC with the sales process, the second source familiar said.

Vermont-based private equity firm Edgewood Holdings has a management consulting services contract with Ridley, according to Ridley’s 2011 report. Edgewood founder George Dorsey is Ridley’s president.

A sale of Ridley could bring in more than CAD 1 bn (USD 1.01bn), according to media reports. The first person familiar said that Ridley management believes it is currently valued at about CAD 750m, but that figure would swell to CAD 1.5bn once a capacity expansion that will double annual throughput is completed.

The expansion began in August 2011 and is projected to be completed in 2014. The expansion is supported though a loan commitment with the Bank of Nova Scotia and financial commitments from those who use the terminal. Ridley has at least 11 customers on contract, some of them with long term commitments, such as Teck Resources (10 years) and Arch Coal (five years). It began shipping from the Power River Basin region of the US for the first time in 2011, through contracts with Arch, Cloud Peak and Enserco.

Ridley now has an annual shipping capacity of 12m tonnes. Coal accounted for more than 91% of Ridley’s shipments, with 90% destined for Asia, according to Ridley’s 2011 annual report. Petroleum coke shipments accounted for 8.5% with wood pellets making up the remainder. Built in the 1983 at a cost of CAD 250m on land leased from the Port Rupert Port Authority. Ridley reported a net operating profit of CAD 34m on revenue of CAD 74m, according to its 2011 annual report.

Recent news reports named various companies as potential bidders, including coal producers, private equity players active in energy infrastructure, transportation firms and terminal operators. Potential bidders, according to the reports, include Canadian National Railway, Brookfield Asset Management, the Ontario Teachers’ Pension Plan, the Jim Pattison Group, the Blackstone Group, Teck, Kinder Morgan and Kanawha River Terminals.

The Ridley Terminals Users Group, a legal entity that represents a collective of major resource producers which are current or future customers of Ridley could also be involved in a bid, said one source close to the organization. It had previously proposed to the government that it operate Ridley as a user consortium for its members, which include big players like Arch, Peace River Coal, Anglo American and Xstrata Coal.

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