After 17 years at Onex Corp. – where he was a managing director who oversaw some key investing platforms – Andrew Sheiner hung out a shingle in 2012 to create Altas Partners. Since then, he has assembled a team that includes former colleagues as well as industry experts from firms such as KKR & Co. and Providence Equity Partners. Together they are searching for large deals, hoping to write equity cheques of between $100-million and $500-million a transaction.

To differentiate themselves in the intensely competitive private equity market, the team at Altas is keen on investing in assets that can be held for longer than usual. Private equity firms typically sell their investments after four to five years, but Mr. Sheiner is looking for opportunities that can deliver bigger profits if they are owned for longer than that.

Not only does that mindset help Altas line up co-investors such as pension funds, who often look for long-term opportunities, but Mr. Sheiner said it helps the firm avoid some of the traditional drawbacks.

Because the private equity industry has matured over the past two decades and now has roughly 400 North American firms with more than $500-million in capital each, the majority of deals today stem from one private equity investor flipping an asset to another. “Sometimes that’s done for the right reason,” Mr. Sheiner said. “Other times, it’s done simply for structural considerations.”
Such sales come with transaction costs, and they are also subject to taxes, which can strip out value. More than that, investors can suffer when a private equity fund they have money in sells an asset to a second fund they have also invested in, because the embedded expenses and taxes create costs along the way. “It’s not uncommon for large investors to find themselves on both sides of the transaction,” Mr. Sheiner said.

To date, Altas has struck two deals. Its first, in late 2013, was the acquisition of Saskatoon-based NSC Minerals, which provides salt for road de-icing and agricultural applications in Western Canada and the northwest U.S.
The second, which closed this week, involves Altas teaming up with a fund advised by Baring Private Equity Asia to acquire an equity investment in St. George’s University. The school, based in Grenada, offers medical degrees, and its graduates often become medical residents in the United States. Financial terms were not disclosed, but a source familiar with the transaction said the deal valued St. George’s at $750-million (U.S.).

To help shoulder the burden, Altas teamed up with OPSEU Pension Trust (OPTrust), the pension plan for Ontario public sector employees, to share its portion of the transaction. Such partnerships come naturally to the firm because of its team members’ long-standing relationships. The deal is OPTrust’s 12th direct private investment in the past two years.

In an ideal world, Altas would like to acquire one to two large businesses a year, Mr. Sheiner said, but acknowledged that it is a tough landscape to navigate because it is a “crowded market.” And given the recent trend of disruption, where long-standing business models are suddenly shaken to the core by technological innovation, the team is taking their time to find investments whose business models aren’t susceptible to such immediate change.

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AUGUST 8, 2014 — TIM KILADZE, THE GLOBE AND MAIL

Altas welcomes Anthony Bowe as the newest member of its Advisory Board. Tony retired at the end of 2013 as Co-Head of Credit Suisse’s Private Fund Group, having been with PFG, and its predecessor at Donaldson, Lufkin & Jenrette, since 1998. Tony joins Yves de Balmann, John Francis, Andrew Hauptman and Andrew Dunn as advisors to the Firm.

Altas, together with its partners and senior management, has acquired NSC Minerals. Founded in 1988 and based in Saskatchewan, Canada, NSC Minerals is the leading provider of salt for road safety, industrial and agricultural applications, serving customers including municipal, provincial and state governments in Western Canada and the North Central United States. For more information on NSC please visit www.nscminerals.com.

St. George’s University in Grenada has landed a $750 million investment from a group led by Canadian private-equity firm Altas Partners LP and a fund advised by Baring Private Equity Asia, according to a person familiar with the deal.

The new investors will hold a majority stake in the for-profit college, though the original owners will collectively remain the largest single shareholder. The companies declined to share details of the new ownership structure.

The investment underscores the market opportunity for high-quality medical education overseas, as the number of open slots at U.S. schools is dwarfed by the number of applications those schools receive. Last year, according to the Association of American Medical Colleges, just under 42% of the 48,010 applicants to U.S. medical schools enrolled.

The money will help St. George’s, which has programs in medicine and veterinary medicine, expand its global reach, said Chancellor Charles R. Modica. More than two-thirds of the 5,150 students in its four-year M.D. program are U.S. citizens, and almost all of them return to the U.S. for residency programs. Modica said he’s interested in growing the talent pipeline in places like Botswana, South Sudan and parts of Asia.

“We were at a point of recognizing that this could be so much more” than a training ground for U.S. doctors, Modica said. Building capacity for other international students who will then return to their home countries is “chapter two.”

Reuters reported last year that St. George’s was looking to sell itself for upwards of $1 billion, but Modica said the school was never aiming to sell itself outright. “This is my baby,” he said.

He said the funds will go toward scholarships, as well as marketing and outreach to attract future students.

It will also help grow St. George’s network of clinical rotation partners. The school pays about 70 affiliate hospitals to take students for third- and fourth-year clinical rotations, which help pave the way for residency placements. For example, it has a 10-year, $100 million deal for 600 slots at the New York City Health and Hospitals Corp., which runs 11 public hospitals.

St. George’s, founded in 1976, is perhaps best known for playing a part in the U.S.’s 1983 invasion of Grenada; shortly after a Marxist coup on the island nation troops evacuated nearly 1,000 Americans, many of whom were medical students at the university.

Many students who didn’t gain admission to mainland U.S. medical schools pursue degrees in the Caribbean instead, at schools like St. George’s, or Ross University School of Medicine in Dominica and American University of the Caribbean School of Medicine in St. Maartin, both owned by DeVry Inc. The programs tend to have higher price tags than their U.S.-based counterparts, and their outcomes vary widely.

The first-time pass rate for St. George’s students taking the first step of United States Medical Licensing Exam last year was 98%.

St. George’s, whose four-year medical degree has a price tag of $246,400, is eligible to receive federal financial aid dollars. Its medical and veterinary schools received upwards of $85 million in federal unsubsidized and Grad PLUS loans in the first quarter of calendar 2014.

Modica met Altas founder Andrew J. Sheiner about 18 months ago, and the deal formed from there, they said. Sheiner founded Altas in 2012 after working as a managing director at Canadian buyout firm Onex Corp. Its other main investment is NSC Minerals, a Saskatoon, Saskatchewan industrial salt provider.

Baring Private Equity Asia advises funds with upwards of $5 billion in committed capital.

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AUGUST 8, 2014 — MELISSA KORN, THE WALL STREET JOURNAL

The launch of peHUB Canada got me thinking – Canadian private equity has come a long way in a short time. A landmark year was 1983, when Gerry Schwartz founded Toronto’s Onex Corp. and acquired the Canadian subsidiary of American Can Co., then the largest leveraged buyout in domestic market history.

Onex went on to do bigger things, in part due to the leadership of Andrew Sheiner, who joined the firm in 1995. Eighteen years later, Sheiner retains a yen for innovation, leaving Onex in 2012 to found Altas Partners. I caught up with him recently and we spoke about the early days of private equity.

“I’m grateful for the opportunity to have worked at Onex,” he said. “Gerry and his team created a unique culture. From the beginning Onex pursued a strategy that was based on the principle that investments should be made using our own money and the firm’s capital. And Onex continued this practice as it evolved to managing third-party partnerships.” (Onex committed US$1.2 billion to the US$4.7 billion Onex Partners III LP, which closed in 2010.)

“Onex is one of the best private equity firms in the world today largely because of this principle,” he added.

In his nearly two decades in private equity, Sheiner has made note of some significant changes. For example, in the 1980s and 1990s, “private equity was an entrepreneurial business,” he said. “Now it’s an asset class. It’s a global industry, institutionalized by a large limited partner community and supported by a massive number of service providers.”

Additionally, private equity has become “homogenized,” in Sheiner’s words. He pointed to the in influence of the traditional limited partnership model, which drives market dynamics and which has not changed much over time. “Because all buyout firms operate through identical fund structures, and because they’re compensated in the same manner, virtually all of them do the same thing,” he said. “They acquire a company, improve it, and then sell it within three to five years.”

While Sheiner says he believes the traditional mode of private equity investing remains viable, he also thinks its locked-in behavior of buying and selling overlooks a great many opportunities. “There’s no magic in five years,” he said. “Great businesses are hard to buy. If you are fortunate enough to own one, and that business continues to perform strongly, you should be careful about selling it.”

This perspective may resonate with LPs. As the owners of private equity-backed assets, some limited partners are frustrated when quality companies are sold too early, in their estimation. Sheiner said LP frustration has increased in the post-2007 market environment and its heavy reliance on sponsor-to-sponsor deals.

“There’s a mismatch between many private equity firms and LPs,” he said. “Institutional investors need options for longer-term ownership and for ownership strategies that make more effective use of their capital.”

Sheiner said he has repeatedly heard this message from LPs and that is what convinced him of the need for a new type of buyout firm. “When innovating, sometimes you need a blank sheet of paper,” he said. The result was Altas Partners.

Altas collaborates with investors that share its orientation. The firm’s model features less imposing fees, less utilization of leverage in deals, and longer-lasting majority stakes in diverse North American companies that are “hard to replicate,” Sheiner said. All aspects of the Altas Partners’ culture – such as the structure of management, compensation and the selection of advisors – are designed to align with the firm’s novel approach to ownership, he notes.

Since its founding last year, Altas Partners has grown to a team of seven professionals, has secured its first backer and is looking to invest up to US$500 million in high-quality businesses, Sheiner said.

As might be expected, he is bullish about Canadian private equity. “The Canadian market has emerged strongly and consistent with the size and stability of the economy,” he said. “It’s a very attractive market, though it remains under-served.”

Sheiner is particularly proud of the market role played by ONCAP, established by Onex in 1999. He is also proud of the relationship he developed with Michael Lay (ONCAP’s managing partner, and formerly of Teachers’ Private Capital). He said the two worked closely to build ONCAP into “one of the pre-eminent mid- cap firms in North America.”

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KIRK FALCONER, PE HUB

TORONTO PRIVATE EQUITY FIRM HIRES PROVIDENCE VETERAN

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Toronto-based Altas Partners, a private equity firm trying out a new model with longer-term investments, has hired a veteran of top U.S. telecom buyout fund manager Providence Equity Partners.

Altas Partners, founded by long-time Onex Corp. executive Andrew Sheiner, this week brought in Scott Werry as a principal.

Providence is perhaps best known in Canada for partnering with Ontario Teachers’ Pension Plan to very nearly acquire BCE Inc. in the world’s largest leveraged buyout, just as the financial crisis was beginning. (For a while, Onex was part of a rival consortium stalking BCE but backed out.) Mr. Werry had been with Providence since 2005, and looked in particular at investments in communications and business services. He was a director of Canada’s Q9 Networks, which was acquired last year by BCE, Ontario Teachers, Providence and Madison Dearborn Partners – basically the same group behind the BCE buyout plan.

Before that, he worked at an investment banking firm known as McColl Partners.

Altas is focused on investments of $75-million to $500-million, and says its model can provide returns that are similar to “traditional” private equity funds but with lower risk.

The idea is to own companies for longer than the regular period of roughly five years, with less debt, and emphasize multiples of invested capital as a yardstick.

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BOYD ERMAN, THE GLOBE AND MAIL