Broadleaf went from a division of a public company under Weyerhaeuser, to private in the Platinum portfolio, then back to public again in this merger with CanWel.Constructing an Upside in the Midst of a Downturn
From the outside, it seems a small miracle that Platinum Equity and CanWel negotiated such a successful deal around building materials distributor Broadleaf Logistics. Housing starts are at an all-time low. Building materials are languishing in warehouses. Today’s scarce financing and generally difficult M&A transaction environment make this deal, unlikely on the face of it, even more interesting.
From Carve-Out to Standalone
Originally a building materials distribution division of Weyerhaeuser, Platinum carved the division out in 2007. Establishing it as a stand-alone company, we created new systems and policies, installed senior management, and developed a long-term operational strategy for the fledgling brand, Broadleaf. We promoted a culture of operational excellence and strong customer service, building up the business even as the building materials market plummeted.
Competitive Complements
CanWel Building Materials is a direct competitor to Broadleaf and among the largest building materials distributors in Canada. In fact, CanWel was originally interested back in 2007 when Weyerhaeuser first offered the division for sale. The enhancements and stability we built into Broadleaf as a standalone made it an even more attractive acquisition target for CanWel.
Overcoming Complexity
It was a logical market consolidation that we knew would serve the shareholders and the industry well, so we collaborated diligently with CanWel to craft an unorthodox structure that made the deal feasible.
To fund the acquisition, CanWel conducted a successful equity raise in this unlikeliest of markets. Institutional investors provided the capital, casting a strong vote of public confidence in the future of the CanWel-Broadleaf union. This gave CanWel funds for the acquisition, to pay down debt, and to retain liquidity for future growth.
“The CanWel-Broadleaf union creates value for the employees and customers of both brands.”
—Jacob Kotzubei, Partner, Platinum Equity
To facilitate the deal, CanWel won approval from its shareholders and regulators to convert its business classification, an income trust, and become a publicly traded corporation. This enabled CanWel to pay for part of the deal with shares, making Platinum the second-largest shareholder in the new CanWel-Broadleaf union. It also means that we retain a meaningful post-divestiture interest in the future success of a company we helped to build.
360-Degree Win
It’s an all-around win: Shareholders prosper with a healthier and more profitable company. Customers gain a broader and more efficient distribution partner. CanWel acquires a stronger position in the Canadian building materials market. Platinum benefits with the sale of and post-divestiture interest in the integrated company. Even Weyerhaeuser, which originally sold Broadleaf to Platinum, triumphs with expanded distribution capabilities under the new corporation.
Creative Thinking and Flexibility
Closing deals in today’s market takes creative thinking and flexibility which Platinum, CanWel, and its investors provided. It was another classic Platinum transaction: an acquisition in a difficult market, refined operations under our portfolio, and closely collaborating to create a deal that works for everybody.
The enhancements and stability we built into Broadleaf as a standalone made it an attractive acquisition target for CanWel and helped make the deal an all-around win.